BusinessHABForeign Car Repair
Foreign Car Repair: If you’ve dreamed of starting your own business and you think you’re finally ready to make your dreams a reality.
You need to make sure you have enough money to start strong and keep operating while you build your sales and your reputation in your industry.
Start-up costs vary widely depending on the type of business you’re starting.
You can start a home-based service business for relatively little, while a brick-and-mortar retail shop would require a more significant outlay.
To estimate start-up costs, list all of the assets and expenses needed to start the business.
Creating a realistic projection of your sales in your first year will give you a good idea of how much you’ll need to get your business up and running.
Assessing Your Spending on Assets
List equipment you will need to start.
Depending on the type of business you want to open.
You may require significant equipment so that you can provide goods or services to your potential customers.
For start-up purposes, focus on the bare minimum you need to operate.
- Focus on equipment that, for tax purposes, will depreciate over time.
- Don’t include office equipment such as computers or printers here, because these costs typically can be deducted all at once.
- The type of equipment you’ll need depends on the type of business you want to open. For example, if you want to open a coffee shop, you’ll need appliances, an espresso machine, and coffee makers.
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Estimate spending on office furniture and store fixtures.
Some types of businesses will require fairly significant outlays of furniture and fixtures.
Especially customer service offices or retail establishments.
As with equipment, you should concentrate on acquiring the bare minimum necessary when you’re just starting out.
- Even if you’re opening a service-based business, think about the type of office environment you want to create to determine what your needs will be.
- If you plan to meet clients at your office, you may need a waiting room and reception area, as well as a conference room.
- On the other hand, if you’re a B2B business, you probably want several conference rooms to accommodate clients.
- For businesses in the tech field or that won’t typically have clients coming into the office, an open office environment is not only the trend in office spaces but could potentially save you on furniture and fixtures.
- If you’re opening a retail store, on the other hand, you’ll need plenty of shelving and tables to display the products you’re offering for sale.
- Keep in mind that surplus and liquidation sales can be an excellent source for office furniture and fixtures that will enable you to get higher quality furnishings at a much lower price.
Account for inventory or raw materials.
If you’re opening a retail store, you’ll need a starting inventory, while if you’re going into the business of making things, you’ll need materials and supplies to make the things you sell.
- While you know you’ll need a certain minimum base inventory to open your doors, after your business is open these costs will be variable.
- The more sales you have, the greater your inventory or raw materials costs will be.
- While you should be able to absorb this increased cost as a result of increased sales, you need to account for the difference as much as you can when you create your business budget.
- You may want to plan out several different projections for spending on inventory or raw materials coupled with an increase or decrease in sales.
- Be sure to factor in bulk rates. Your suppliers and vendors may give you a discount if you’re buying larger quantities of a particular product.
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Include one-time expenses.
Starting a new business comes with many expenses that won’t occur regularly.
Or may need to be renewed once a year, such as building a website.
You also may have additional one-time expenses associated solely with start-ups, such as consultant or attorney fees.
- Keep in mind that most, but not all, of these one-time expenses are tax-deductible. When listing them, you may want to make a note of which are tax-deductible.
- Ask an accountant or tax professional if you are unsure.
- For each one-time expense, you also want to note if any renewal is required. Although you typically won’t need to factor renewals into your estimate of your start-up costs, it will help you develop your budget.
- For example, if you’ve paid to register a domain, you will need to renew your registration after a year or so, depending on how many years you initially purchased.
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Factor in licenses and other fees.
Particularly if you’re opening a brick-and-mortar store, you may have to purchase a business license or pay fees for health and safety or other inspections.
Businesses organized as corporations or LLCs typically must pay additional registration fees.
- The Small Business Association has lists of common licenses needed for various types of businesses, as well as the agencies or government departments that issue them.
- You also may be able to find information by visiting your state’s small business website.
- Include applicable deadlines for all licenses, inspections, or registrations with your list. You can use them to make sure you have everything done before you open your doors to the public.
- Getting licenses or incorporating your business also may come with attorney’s fees if you hired an attorney to draw up your incorporation documents and shepherd you through the process.
Calculating Regular Expenses
Start with rent and utilit£ies.
If you’re leasing office or warehouse space, or a storefront.
The amount you pay each month to the landlord, as well as the amounts you pay for electricity, water, telephone, and internet are fixed, necessary expenses that must be included in your estimate.
- If you’ve not yet found a location, you’ll want to at least have an estimate of what your rent and utilities will be.
- Make sure you’re including the cost of liability insurance here. If you’ve not already found a space, you still may be able to get estimates of the monthly cost.
- Evaluate the market in the location where you want to start your business to get a general idea. You also may want to talk to other small business owners in the area.
- Particularly if you’re starting a service-oriented business, you may want to consider whether it’s possible for you to operate your business from your home.
- Keep in mind there may be costs associated with a home-based business, such as if you want to participate in an office-share program or get a P.O. box so you aren’t using your home address for business communications.
- However, these costs typically will be much less than commercial lease payments, with more flexible arrangements. A home-based business can potentially save on other costs, such as office furniture and equipment, as well.
Add monthly bills for services, subscriptions, or leases.
Another part of your monthly expenses is any additional services to which you subscribe to keep your business running.
You also should factor in monthly payments for any cars or equipment that you’re leasing for your business.
- Next to each item, make a note of whether it is a necessary or optional expense.
- If your expenses turn out to be too high for your business to be sustainable over several lean months of initial operations, you may need to postpone some optional services until later.
Include computers and office equipment.
Although you probably won’t replace them for at least a couple of years.
Since computers and other office equipment such as printers or fax machines typically are deducted all at once rather than depreciated, these purchases are considered regular business expenses.
- If you already have personal computers or other office equipment that you’d like to convert to personal use, talk with a tax professional regarding the amount that you can deduct for conversion of these items.
- Look for refurbished electronics if you need to purchase additional ones for your office. Buying refurbished can allow you to buy a higher quality machine at a lower price, and most manufacturers offer similar warranty and protection plans for factory-refurbished items.
- Include the cost of any warranties or service contracts when you’re factoring in your expenses for electronics – especially if you’re buying new or refurbished machines.
Estimate your payroll.
When calculating your payroll, you may want to make several estimates to cover different scenarios, since you probably will open with a skeleton crew and intend to hire additional workers later on.
- For example, if you’re opening a coffee shop, you may be working many hours yourself without a salary to start. However, you’ll also need at least a couple of additional employees, particularly during peak hours.
- Paying starting employees a salary rather than by the hour can help you fix your payroll costs so you can plan for them, rather than having them vary based on hours worked or potentially having to pay overtime.
- Calculate the cost of hiring a new employee – both part-time and full-time – and keep that number handy for budgeting purposes, so you can easily tell when it’s time to bring someone new on staff.
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Consider costs for advertising, marketing, and promotions.
At the same time, be aware that the most expensive advertising campaigns don’t necessarily guarantee sales.
- You may want to get estimates from a few different advertising or marketing companies so you can plan the types of advertising you want to pursue and the costs for each.
- Keep in mind that if you plan to have television advertising, there will be costs to plan, produce, and edit the commercial in addition to the fees for air time.
- These costs typically will be at least several thousand dollars.
- On the other end of the spectrum, social media advertising can be fairly cheap, and you can set up accounts for your business for free.
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- Spread the word among friends and family members to follow your business’s social media accounts and encourage their friends and followers to do so as well.
- Talk to your local business school about setting up an internship program for your social media campaign.
- It can be a wonderful opportunity for a marketing major and using an intern can save your business a lot of money.
Finding Total Start-Up Costs
Total your costs and expenses.
Your first step to estimating your start-up costs is to add up the one-time expenses.
And the cost of business assets, along with several months of regular business expenses.
- If the total is so high that it’s unrealistic that you will be able to raise the necessary funds, look at some of your optional expenses. Some of these you can cut completely, and for others, there might be a cheaper alternative.
- Your goal is to get your start-up costs to the lowest possible number, but at the same time, you don’t want to scrimp on something you actually need or that will limit your business’s ability to grow.
- At least for your initial estimate, including six months of expenses.
- Depending on your sales forecast and other projections, you may want to lower this, but you should never start your business without enough cash on hand to cover at least three months of expenses.
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Understand your burn rate.
The phrase “burn rate” is typically used with tech start-ups to calculate how much of their seed money they’re spending each day until they have a product ready to go to market.
- The “burn rate” concept can be helpful in other types of businesses as well and can help you determine how much money you’ll need to get your business up and running.
- Even if you plan to offer goods and services from the minute you open your doors, you still need to know how much it’s costing you to operate your business every day. The difference between your daily costs and your daily sales is your burn rate.
- You can use your burn rate to make sure you have enough cash reserves, as well as to set reasonable sales goals to motivate your employees.
- Keep in mind that you can’t determine how much money you must have until you understand how much you’ll need on a daily basis.
- Plan to have at least six months’ worth of expenses in your cash reserves, not including what you’ll need to spend on one-time costs. Ideally, you’ll want more than that.
Create a sales forecast.
To make realistic projections for your sales, you’ll need to analyze the market for the product or service you’re offering.
Looking at data on the performance of other, similar businesses in their first years of operation can give you a good idea of reasonable expectations.
- If you’re going to create a full-scale business plan to present to investors, these calculations can be used there as well.
- Once you open your doors, your sales forecast is something you should revisit each month and adjust accordingly. If you exceeded your goal, push the goal upwards. However, if you drastically missed your mark, you may want to re-evaluate your entire budget picture.
Build a working spreadsheet.
To begin your budget and get a better idea of how to estimate the funds you’ll need to start your business, create a spreadsheet that includes income and expenses for each month.
- When you’re building your spreadsheet, create a column for each month of a 12-month period, and run your expense categories down the side.
- Don’t include capital expenditures (such as fixtures, furniture, or equipment) or any expenses that are one-time or annual, since you’re only projecting out one year.
- Below your expense categories, create rows for taxes, income, and net profit (or loss). Once you’ve populated your rows, you can start making those calculations.
- Add up the losses each month, and that’s a good estimate of the start-up money you’ll need after you add back in your capital and one-time expenses.
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Plan for the worst-case scenario.
Starting with the basic principle of overestimating your costs and underestimating your sales, arrive at a total amount of money that you need to start up your business that’s realistic, but includes a cushion should a catastrophe occur.
- The Small Business Association has a number of tools and calculators on its website that you can use to make the math easier when you’re making multiple projections.
- You also may be able to find assistance with building your budget and developing your start-up business plan by visiting your local Small Business Development Center.
- If you are a woman, veteran, racial minority, or member of another group that is demographically under-represented among small business owners, there are other nonprofit organizations specifically to help you.
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