The reason Many new businesses fail is because people do not acurately calculate their start up costs. People will often calculate how much money is needed for them to open their business door and forget to include how much money they will need to run the business until they began making a profit. Some journalists feel you should have at least six months worth of monthly expenses calculated into your start up cost. However, to be safe I would recommend including the expenses for one year.
When calculating your cost always begin with research. Locate other people that had started businesses similar to yours. Don't be afraid to shoot them an email or phone call. You would want to find out how much their initial costs were, and obstacles that they may have ran into. You could attend conferences, community business meetings geared toward your business interest. Locate business conventions. All of which will provide you with an opportunity to meet other people in your industry and build networks or ask questions. Another very useful resource would be your local library. Libraries house tons of information that you may not know how to access, and with the help of a librarian you leave with a lot.
Alwaya determine your expense. However, you also want to differentiate between your initial expenses and your ongoing expenses. The initial expenses are going to be the ones that you will incure to start the business (i.e. licenses and permits, marketing materials, supplies and inventory, remodling, etc.). The ongoing expenses are the expenses you will pay on a monthly basis (i.e. payroll and owners draw, insurance, taxes, debt repayment, advertising, etc.)
With a well constructed analysis you should be able to put dollar values to the expenses in parenthesis. Crunching your numbers is a simple calculation.
ongoing expenses x 12 months = money needed to keep door open
money needed x initial expenses = total cost to start your business
When calculating your cost always begin with research. Locate other people that had started businesses similar to yours. Don't be afraid to shoot them an email or phone call. You would want to find out how much their initial costs were, and obstacles that they may have ran into. You could attend conferences, community business meetings geared toward your business interest. Locate business conventions. All of which will provide you with an opportunity to meet other people in your industry and build networks or ask questions. Another very useful resource would be your local library. Libraries house tons of information that you may not know how to access, and with the help of a librarian you leave with a lot.
Alwaya determine your expense. However, you also want to differentiate between your initial expenses and your ongoing expenses. The initial expenses are going to be the ones that you will incure to start the business (i.e. licenses and permits, marketing materials, supplies and inventory, remodling, etc.). The ongoing expenses are the expenses you will pay on a monthly basis (i.e. payroll and owners draw, insurance, taxes, debt repayment, advertising, etc.)
With a well constructed analysis you should be able to put dollar values to the expenses in parenthesis. Crunching your numbers is a simple calculation.
ongoing expenses x 12 months = money needed to keep door open
money needed x initial expenses = total cost to start your business
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