Starting your own business is an exhilarating and fantastic experience. However, if you’re a first-time entrepreneur, it’s fair to say that you’ve probably got some concerns to address too. For instance, you may be worried that after you give up your 9-to-5 job and place your life savings into your new venture, it will fail and leave you with nothing.
Although there’s no way to know for sure whether a business will be successful in the long-term, there are steps you can take to boost your chances of success financially. Planning your business budget and making sure that you’re ready to address all the costs associated with launching a company will reduce your risk of any nasty surprises.
To help you prepare for a life-changing journey, we’ve put together a list of some of the most common business startup costs you’ll need to think about. This list doesn’t include everything – so make sure that you do your research before you apply for your business loan or capital investment to start your company.
1. Research Expenses
One of the main reasons that companies fail, is that their leaders haven’t done enough research to make sure that the product or service that they’re selling is in demand. The best way to run a successful business is to find a problem that your target audience is dealing with and come up with a reliable solution. Unfortunately, a lot of entrepreneurs fail to do the right research before they start investing in their company.
When planning a budget for your business launch, make sure that you think carefully about the amount it will cost to research you competitors, or even work with a market research firm that can offer you insights into your industry.
2. Essential Equipment
In today’s digital age, it’s not uncommon for companies to assume that they can get by without investing in any equipment whatsoever. You might think that just because you don’t need an office premises or a physical production warehouse, you don’t need any starting to capital to launch your company. However, the truth is that all businesses need some equipment.
If you’re running a new restaurant, then you’re going to need to pay for a location (real estate), as well as cooking equipment, a seating area for your patrons, and even food to cook. If you’re running an online dropshipping business, then you won’t need as much initial equipment, but you’ll still need a good internet connection, a computer, a business website, and perhaps even an office space where you can meet with clients.
3. Legal and Setup Fees
When you decide to launch a business for the first time, you’ll need to determine what kind of “entity” you’re going to run. The business entity you choose will determine how your taxes are structured for the years to come. For instance, if you decide to incorporate your company, you’ll turn it into a separate legal entity, which means that you need to file incorporation taxes with the state.
If you’re not sure how to structure your company, your best option is to discuss choices with an accountant or financial professional. Additionally, while you’re talking to professionals about your legal and setup fees, you may also want to discuss things like any professional licenses you’re going to need to run your company. For instance, dentists, hairdressers, and even restaurants that sell alcohol are required to have specific certifications. Check on the licensing and permit options in your state to ensure that you don’t end up on the bad side of your government’s rules and regulations.
4. Supplies and Inventory
Some companies don’t sell any inventory. If you’re a business that deals in online webinars and downloads, then you don’t need to worry about physical inventory. You can also cut this cost from your business budget if you’re running a dropshipping business where someone else sends your products to your customers. However, if you’re in the retail, manufacturing, or restaurant sectors (among others), you may need inventory.
Investing in inventory can be a challenging thing. On the one hand, you’ll want to purchase plenty of stock in advance so you can take advantage of bulk deals. On the other hand, buying too much inventory at once can mean that you’re more likely to risk theft, losses, and spoilage.
5. Promotion and Advertising
When the time comes to launch your business, you’ll need to make sure that as many people know about your new company as possible. For instance, you might want to invest in business cards and billboards offline, as well as online advertising campaigns like social media and content marketing.
All organizations need to invest in some kind of marketing – regardless of whether they’re large or small. How much money you choose to put into this area will depend on your budget. A lot of companies start small with their marketing efforts, then ramp up gradually as they begin to find more money that they can invest in their growth.
6. Website and Online Presence
Speaking of marketing, it’s important to remember that if you want to succeed in today’s marketplace, you need more than just an offline presence. You’ll also need to ensure that you have a place online where people can find you. When calculating how much money you need to borrow with your new loan, ask yourself how much it will cost to pay for:
- A professional website designer
- A hosting company to manage your domain for at least a name
- A business name if you need to buy one
- Social media marketing support
- A content writer to help fill out the copy on your website
To expand your online presence, you may also need to think about budgeting for some fixed expenses like blog writing, social media, email marketing, and more to keep new customers coming your way.
7. Payroll
Finally, no matter how talented you may be, it’s always easier to run a business if you have some extra help. If you hire employees to help with things like online presence management, handing sales, or even optimizing your finances, then you’re going to need to pay them.
Putting money aside for payroll may mean thinking about not just how much you’re going to pay your employees, but also how much you’re going to pay for things like accounting software and bookkeeping tools to help you track your incoming and outgoing expenses.
