How to Calculate Startup Costs for a Business

One of the most common reasons for a failed business is a lack of financial planning by business owners. While you may anticipate the cost of producing your goods, you may not account for the cost of renting office space or taxes that you have to pay at the end of the year. In a few simple steps, you can calculate startup costs for a business and create a realistic picture of your company's future.

Difficulty: Moderately Easy

Instructions

Develop a Business Startup Budget

1. Use online startup calculators to help assess the amount of funding you need to start your business. The BPlan website features a number of financial calculators with simple interfaces to help you determine startup costs (see Resources below). Before utilizing a calculator, make sure you have all the necessary paperwork in front of you to create an accurate calculation.

2. Determine costs you will accrue before you set foot in your storefront or office. Your business needs promotional materials, payroll and funds for the first production run of your product. Add five percent to this amount to give yourself a cushion.

3. Estimate the amount of funding you will need for employee wages and benefits over the first year. As a small business owner, you need to assure your employees that their commitment to your product will be rewarded with a consistent pay check.

4. Build an emergency fund into your calculations of a business startup budget. The amount of money you put into an emergency account depends on the liquidity of your personal funds. A good rule of thumb is to have enough money to pay wages and produce goods for a month.

5. Add all long-term costs and investments when you calculate startup costs. The monthly rent of your production facilities and the purchase of new equipment are examples of expensive long-term investments.

6. Figure out the amount of independent contracting fees you will need in the early stages of your business. You should calculate fees paid to graphic designers, lawyers and inventory auditors. Most contractors are willing to give you quotes for their services that can be used as a component of a startup budget.

Tips & Warnings

• Account for fees and interest taken out of your budget during the startup calculation process. If you have not applied for loans or credit cards, check the interest rates that a number of banks provide to create a good estimate. You should also factor in bank transaction fees and closing costs on new property, as they can add up quickly.

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Resources

• Startup cost calculator at BPlans.com