How to Estimate Start-up Capital for Starting a Business

The costs of starting a business can vary depending on the industry you decide to enter. For instance, the restaurant industry is very different from the technology industry, so the starter costs for a business in either of these areas will reflect this. These costs can be estimated through an outline of your company goals, research and analysis (breaking a topic into smaller pieces to gain a better understanding of it). Estimating your start-up costs will give you an opportunity to gauge both present and future expenses.

Things You'll Need

• Public records

Instructions

1. Research probable business expenses. These expenses include the cost of leasing or purchasing a space, utilities (electric, water, gas, trash, phone and Internet), licenses and permits, and marketing rates. Contact a CPA to help in calculating any tax obligations (state, federal and local).

2. Take advantage of industry-specific public information. Review companies' financial statements. These companies may be larger than yours, but you can common-size them (take each item as a percentage of sales and assets), then use them to estimate costs by comparing those percentages to your sales estimates. Furthermore, these financial statements can provide insight into future expenses and probable growth.

3. Develop a budget. Use the above-mentioned cost estimates and factor them against loans, grants (if eligible), personal savings and lines of credit. Then prioritize all expenses in order of need.

References

• Estimating Capital Needs for a New Start-up