Outlining startup costs is a critical part of preparing to launch a new small business. In your business plan and budget, you’ll want to detail all the expenses you anticipate incurring to get your business up and running, so you procure the right amount of financing.
While most entrepreneurs think to include the obvious things, like the cost of equipment and a business location, there are a number of less-thought-of items that you’ll need to consider. Failing to incorporate these startup costs into your business plan could result in a much tighter budget than you originally expected—a mistake that could hurt your company right out of the gate.
Putting together your small business plan? Make sure to factor in these six startup costs.
1. Research costs
Some of the most overlooked costs related to small business planning come into play even before you open your doors: the costs for research and market analysis. Doing research into the market, your competitors and your potential product lines usually takes time. However, if you decide to outsource this work to a market research firm, there will also be costs involved.
If you are buying a franchise, there are franchisee fees and other pre-opening costs to consider that are generally outlined in the franchisor’s Franchise Disclosure Document (FDD). They could include marketing, technology, equipment and other fees.
2. Location expenses
Whether or not your business will need to budget for property or other business location-related expenses will depend on the type of business you open. If your business requires a storefront—or even storage or warehouse space—scope out potential locations and estimate how much you can afford to spend on renting or purchasing the space.
Home-based businesses and franchises will have some location fees as well if you need to purchase office equipment like a computer, desk, filing cabinets and the like.
3. Permits, licenses and insurance fees
Depending on the type of business you’re opening, you might be required to obtain a number of permits, licenses and insurance policies to legally operate in your area. Some of these things might come with application or filing fees you’ll need to plan for in your startup budget.
4. Equipment and supplies
The costs for equipment and supplies are likely top of mind for you while writing your business plan. Don’t rush through the cost projections for this section, or you might end up forgetting or underestimating some things! It’s a good idea to budget slightly more for startup equipment and supplies to account for changes in pricing and overlooked items.
5. Technology expenses
Today’s businesses rely on a range of technologies to conduct business operations. Unfortunately, these things all come with costs that can add up quickly and take you by surprise. Consider which technological expenses your startup will need, such as a customized URL and website, payroll software and internal information systems.
6. Financial assistance fees
One last thing you’ll need to consider is how you plan to source capital to fund your startup. Some financing methods will require fees or payments you’ll want to factor into your business plan and budget.
If you plan to take out loans, make sure you account for any fees that might be associated with professional application assistance. Additionally, you should factor loan payments and interest into your monthly budget.
If you plan to utilize a debt-free financing method like a Rollover as Business Startup (ROBS), you’ll want to account for fees owed to the Third-Party Administrator (TPA) in charge of setting up and managing your account. These fees may include a one-time startup fee and an ongoing management fee.
Once you’ve assigned an estimated cost to everything you need to launch your business, use the total to start gathering your small business financing. Need help finding the funds to get your business off the ground? Tenet Financial Group can help you determine your funding needs and connect you to the right financing method. Contact our Senior Consultants today!