Business Startup Cost Estimate - Part II
The startup cost estimate table will help you answer the second question of this business startup financial series: how much money will you need to start your business? The chart is for a generic retail business.
Items will vary for service, construction, and manufacturing businesses.
The answer to the third question (How much money will you need to stay in business?) must be divided into two parts: immediate costs and future costs.
Startup Cost Estimate Decorating, remodeling $____________ Fixtures, equipment $____________ Installing fixtures, equipment $____________ Services, supplies $____________ Beginning inventory cost$____________ Legal, professional fees$____________ Telephone utility deposits$____________ Insurance$____________ Signs$____________ Advertising for opening$____________ Unanticipated expenses$____________ TOTAL STARTUP COSTS$____________ From the moment the door to your new business opens, a certain amount of income will undoubtedly come in.
However, this income should not be projected in your operating expenses.
You will need enough money available to cover costs for at least the first three months of operation.
The next table will help you decipher your estimated finances for one month.
This will help you project your operating expenses on a monthly basis.
Estimate for One Month Your living costs$____________ Employee wages $____________ Rent$____________ Advertising $____________ Supplies $____________ Utilities $____________ Insurance $____________ Taxes $____________ Maintenance $____________ Delivery/transportation $____________ Miscellaneous $____________ TOTAL EXPENSES FOR ONE MONTH $____________ Now multiply the total of table 3 by three.
This is the amount of cash you will need to cover operating expenses for three months.
Deposit this amount in a savings account before opening the doors to your business.
Use it for only those purposes listed in the above table because this money will ensure that you will be able to continue in business during the crucial early stages.
Total for Three Months __________ (Total of table 3) X 3 =__________ (Three months' operating expenses) By adding the total startup costs (table 2) to the total expenses for three months (table 4), you can learn what the estimated costs will be to start up and operate your business for three months.
By now subtracting the cash available (table 1), you can determine the amount of additional financing you may need, if any.
Additional Financing Needed _________ (Table 2 total) + _________ (Table 4 total-three months' operating expenses) = _________ (Three months' startup/operating expenses) - _________ (Table 1 total-cash available) = _________ (Additional financing needed) After Startup The primary source of revenue for your business will be from sales or services performed, but your sales will vary from month to month because of seasonal patterns and other factors.
Therefore, it is important to determine if your monthly sales will produce enough income to pay each month's bills.
Conclusion Without a doubt, preparing an adequate plan is the most important step in starting a new business.
A comprehensive plan will be your guide to managing a successful business and is paramount to your business success.
Your plan must contain all the pertinent information about your business; it must be well written, factual, and organized in a logical sequence.
Moreover, it should not contain any statement that cannot be supported.
We will cover this further in strategy my article series.
If you have carefully answered all the questions on the checklists and completed all the worksheets, you have seriously thought about your goal.
Nevertheless, there may be some things you feel you need to know more about.
Owning and running a business is a continuous learning process.
Research your idea and do as much as you can yourself, but do not hesitate to seek help from people who can tell you what you need to know.
Consider hiring a business coach obtain assistance from your local SBA office, Small Business Development Center (SBDC), or the Service Corps of Retired Executives (SCORE).
Items will vary for service, construction, and manufacturing businesses.
The answer to the third question (How much money will you need to stay in business?) must be divided into two parts: immediate costs and future costs.
Startup Cost Estimate Decorating, remodeling $____________ Fixtures, equipment $____________ Installing fixtures, equipment $____________ Services, supplies $____________ Beginning inventory cost$____________ Legal, professional fees$____________ Telephone utility deposits$____________ Insurance$____________ Signs$____________ Advertising for opening$____________ Unanticipated expenses$____________ TOTAL STARTUP COSTS$____________ From the moment the door to your new business opens, a certain amount of income will undoubtedly come in.
However, this income should not be projected in your operating expenses.
You will need enough money available to cover costs for at least the first three months of operation.
The next table will help you decipher your estimated finances for one month.
This will help you project your operating expenses on a monthly basis.
Estimate for One Month Your living costs$____________ Employee wages $____________ Rent$____________ Advertising $____________ Supplies $____________ Utilities $____________ Insurance $____________ Taxes $____________ Maintenance $____________ Delivery/transportation $____________ Miscellaneous $____________ TOTAL EXPENSES FOR ONE MONTH $____________ Now multiply the total of table 3 by three.
This is the amount of cash you will need to cover operating expenses for three months.
Deposit this amount in a savings account before opening the doors to your business.
Use it for only those purposes listed in the above table because this money will ensure that you will be able to continue in business during the crucial early stages.
Total for Three Months __________ (Total of table 3) X 3 =__________ (Three months' operating expenses) By adding the total startup costs (table 2) to the total expenses for three months (table 4), you can learn what the estimated costs will be to start up and operate your business for three months.
By now subtracting the cash available (table 1), you can determine the amount of additional financing you may need, if any.
Additional Financing Needed _________ (Table 2 total) + _________ (Table 4 total-three months' operating expenses) = _________ (Three months' startup/operating expenses) - _________ (Table 1 total-cash available) = _________ (Additional financing needed) After Startup The primary source of revenue for your business will be from sales or services performed, but your sales will vary from month to month because of seasonal patterns and other factors.
Therefore, it is important to determine if your monthly sales will produce enough income to pay each month's bills.
Conclusion Without a doubt, preparing an adequate plan is the most important step in starting a new business.
A comprehensive plan will be your guide to managing a successful business and is paramount to your business success.
Your plan must contain all the pertinent information about your business; it must be well written, factual, and organized in a logical sequence.
Moreover, it should not contain any statement that cannot be supported.
We will cover this further in strategy my article series.
If you have carefully answered all the questions on the checklists and completed all the worksheets, you have seriously thought about your goal.
Nevertheless, there may be some things you feel you need to know more about.
Owning and running a business is a continuous learning process.
Research your idea and do as much as you can yourself, but do not hesitate to seek help from people who can tell you what you need to know.
Consider hiring a business coach obtain assistance from your local SBA office, Small Business Development Center (SBDC), or the Service Corps of Retired Executives (SCORE).
