If you’ve found yourself reading this post, there has probably been a point in time when you’ve wanted to start up a business or you’ve tried and become lost with the expenditure element of the business.
Ultimately, we always say that planning before execution is key. The same goes with any objective you’re trying to hit in life… as a goal without a plan is just a wish.
Therefore, today we’re going to take you through realistic logistics when looking at how much it costs to start a business. If you’re interested in making your business live and sustaining it over a long period, carry on reading below!
Don’t Go Overboard…
Especially if this is your first time investing in a startup business, you do not want to be in debt and start all over again within the first few months of your company. This is not to say that you can’t risk some of your savings, but using your funds in moderation is essential when building your profile.
A business should be thought of as a marathon, not a sprint, and a long-term successful business with minimal funds to begin with rather than blowing all your budget for short-term success and no sustainability will always have higher performance and cash flow results.
Yes, the optimism of a new business can become quite overwhelming if you’re extremely passionate about your idea, product or service; yet, getting too excited and putting all your money into it can certainly backfire if you’re not prepared to execute perfectly.
Plan Your Expenditure
It’s all well and good to say you’re not going too overboard with your spending, but actually planning it out to see what your non-negotiable, practical, and entertainment expenditures will be is crucial to the health of your business.
Underestimating or even overestimating how much you’ll spend has become a reality that we’ve seen in businesses over the years, and although their idea may have been excellent for the public, they couldn’t continue.
We recommend that you have an amount of savings that can cover your first few months of business. Entrepreneurs altering prices that work, buying stock, or perfecting their service with no planning involved can bolster incredible results if they’re lucky, but it can also become a serious problem if you’re not prepared for the consequences.
Every little detail needs to be taken into account, as money can add up even if it appears that cash is outgoing at a minimal rate. We would recommend you section it into clusters, for example, non-negotiables, entertainment, and practical, to see where you can cut down.
Of course, business is profit-related, but it’s not about just making money; it’s about controlling how much you spend on startup expenses and so on, so that you can reinvest and grow your small businesses, medium or large-sized businesses to the heights they’re destined for.
Let’s Talk About Types of Costs in Detail
We’ve briefly ran through this in the previous section, but breaking them down so that you have a better understanding of what they are and what to look out for is paramount for the growth of your enterprise.
Below, we will discuss the opposing types of costs in detail, as running into a business blindly with no business plan is never a good idea when you’re a new small business owner entering an experienced niche with other successful companies at your will:
Fixed Costs vs Variable Costs
Fixed costs can be a one-time fixed payment of one figure, or they can also be ongoing costs that will always be at the same price no matter what. Whereas variable costs are ongoing costs that will shift depending on a number of factors, such as inflation, production rate, etc.
A good example of a fixed cost would be the salaries that you expect to pay your staff when you hire employees, or it could be the lease payment every month that you’re paying for the building space you require.
On the flip side, an example of a variable cost would be the products that you buy from your supplier (as business owners will depend on the production rate of the supplier). Additionally, another variable cost would be the commissions that you pay your staff (if you’re working in sales), as the costs vary depending on their performance in that specific month. Or, if you’ve used a small business loan to get started, then you will most likely pay varied costs for the credit card each month.
Complementary Costs vs Essential Costs
We all think to ourselves sometimes that something may be needed in a business to improve it, but that isn’t the case in some situations. Not to say that complementary costs aren’t necessary, but they should not be undertaken if you don’t have the initial funds to begin with.
Essential costs are slightly different, as they are costs that will be necessary for the boost of your business’s brand awareness, brand identity, and overall success as a company. Essential costs can also be unexpected costs that will need to be made.
What Costs Can You Expect to See in Your Expenditure Sheet?
So, how much does it cost to start a business? Well, everyone’s business start up costs vary depending on the type of business they own or the niche they’re in, along with the initial funds they have to invest.
In this section, we’re going to give you some knowledge that you need to be aware of when first starting, what non-negotiable costs you’ll be making, and then some beneficial costs that can positively impact your success. Explore the information below:
- Rent: If you’re beginning a brick-and-mortar business, this is one of the key payments that you’ll have to make to sell your products or services to customers/ clients who visit your place of work. It’s essential to include the cost of rent in your initial expenditure sheet, as the price will depend on your office space and area of residence.
- Products (or requirements for your service): Finding a supplier that provides you with good deals, high-quality products or raw materials, and is trusted on the market will be a form of expenditure that will be inevitable. The same applies to your service… if you need something to implement your service properly, this will be an inevitable cost.
- Business Coaching: Although this isn’t essential, business coaching is an excellent way to obtain experience from people in your field who have already been there and done what you’re trying to achieve. Learning from other people’s mistakes and taking their advice will be a huge advantage against other start-up businesses.
- Technology, advertising, promotion, and marketing costs: Without this expenditure, you will not be able to build an online presence, and that is where most transactions happen nowadays with the rise of e-commerce success.
- Permit fees, business insurance costs (public liability insurance, professional indemnity insurance, etc), licencing, and registration fees: Although these are payments you don’t want to make, they’re paramount for the beginning of your business in the UK and if you don’t pay them, you’ll shortly be shut down.
- Website development, design, and digital marketing: Unless you’re a professional in these services, you will need a website, whether you’re selling a product or service, as the rise in demand for them online is unfathomable.
Mark is a multi-award winner in business networking and relationship building. He is passionate about coaching and mentoring business owners and professionals through 1-1 & group coaching, team performance workshops and group mastermind sessions.