How to Calculate Business Start-Up Cost

Video Transcript

"How to Calculate Business Start Up Costs. There are about six different categories of start up costs ranging from Cost of Goods Sold which would be your inventory, your shipping costs, all of the things it takes to actually make the product or get the product in that you're going to sell. The next category would be Professional Fees. That would be things like getting an attorney to possibly set it up as a corporation or do your filings and that sort of thing, hiring an accountant to do your books. The next category would be Technology. You're probably going to have to have computers, may have to have servers, you may have to have dial-in modems, that sort of thing, depending on the nature of your business your technological costs could be quite high. It's important that you get an accurate cost on all these things. The next category would be Administrative Costs, that's your utilities, your office supplies, all of the things that it takes to actually run the business, if you will. Sales and Marketing is the next to the last category, those costs can be quite substantial at times. You're going to everything from business cards to printing brochures, they're not cheap. That all has to be factored in , you need to adequately allow for all of these different expenses. And the last category, Wages and Benefits, are you going to pay yourself a salary, are you going to have any employees, are you going to have to pay payroll taxes, these are all items that come into play. The biggest thing that probably people don't think about is how long is it going to take before I start generating cash and becoming profitable. It may take you anywhere from three months to three years, and somehow you've got to cover all of these expenses that we just talked about for that period of time. But the most important thing is take a good, accurate assessment of what your costs are and be conservative with regard to how long it's going to take to get profitable because it typically doesn't happen as quick as you would hope."