What are Realistic
Start Up Business Costs...Most People Underestimate.

Whether you're completing a Business Action Plan or not, you'll want to investigate small business start up costs before you start a business. Avoid the frustration of thinking you can start a business with $500. and then later, find out $3,000. is more realistic to really achieve the results your are looking for.

What to Include

This section of your business plan outlines how much money you'll need for start up business costs. How you plan on financing the costs.

You must include this section if you are financing or looking for investors.

You will probably have some startup expenses before you begin operating your business. It’s important to estimate these expenses accurately. To plan where you will get sufficient capital. If you are taking out a loan, you might have to make the loan payments before the cash flow starts. You'll want to include them into you start up costs.

Contingencies

The more thorough your efforts, the less chance that you will leave out important expenses or underestimate them. Opening a new business has a way of costing more than you anticipate. But you can make allowances for surprise expenses. Try to include a substantial cushion for beginning operations to ensure you’ll have enough money by adding a separate line item, called contingencies, to account for the unforeseeable.

Talk to others who have started similar businesses to get a good idea of how much to allow for contingencies. Use at least 20 percent of the total of start-up expenses as a safe margin.

Forecasting

Provide an explanation for your research and how you arrived at your forecasts of expenses. Give sources, amounts, and terms of proposed loans.

Costs For Business Start Up

You should include a breakdown of costs in terms of the capital and operational, marketing, and business support costs.

Broken down by dollars and percentages or both.

For example:

Capital and Operational Costs

Office Renovations $500.
Office Equipment $700.
Furniture $600.
Computer $900.
Software $550.
Insurance $500.

Total Capital Costs $3,750.

Marketing Costs

Newspaper adds $1,000.
Pay-Per-Click $300.
Website Costs $300.
Referral Card Campaign $75.
Internet Monthly Access $40.
Auto responders $35.

Total Marketing Costs $1,750.

Support Fees

Association Fees $400.
Network Marketing Start Up Fees $399.
Monthly fees (6 months) $192.
Internet Monthly Access $40.
Auto responder $40.

Total Support Fees $1,071.

Contingencies $1,314.

Total Costs $7,885.

Financing

Capital Financing

Owners equity (50%) $3,942.50
Grants (25%) $1,971.25
Credit (25%) $1,971.25

Total Financing (100%) $7,885.00

Cash Flow

You will likely need a few months of funding to cover expenses before you even open for business. When you do open for business, it might take a few months before you begin to experience cash flow.

Take the time now, before you begin your business, and find ways to begin cash flow as soon as possible. If your endeavor is in a field new for you, allow some time for the learning curve. Be prepared in case it takes longer.

Not planning for re-occurring monthly expenses before having a steady cash flow has caused many businesses to fail.

Don't let this happen to you!

Accounting for Start Up Cost

For the first year of business, you can deduct up to $5,000 for start up business costs and organizational costs. The rules are different for expenses if your costs exceed $50,000. Consult your tax adviser on how to keep records and to report start up costs for your tax returns.

Moms-Work-From-Home-Tips

After adding up all your projected expenses, you may decide your proposed business will cost a little more than you anticipated. Knowing that ahead of time can gives you the opportunity to find other options.

Depending on the business you are planning, with a little brainstorming, you can find ways to keep start up business costs to a minimum. Find opportunities to delay expenses. Put off some expenses until your cash flow increases. Without sacrificing professionalism.

Providing the results you desire...

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