Estimating Start Up Costs

Posted on: September 15, 2014
Tags: Sba, Start, Start-up, Costs, Finances, Financing, Seed money, Money, Loan

If you are planning to start a business, it is critical to determine your budgetary needs.

Since every business is different, and has its own specific cash needs at different stages of development, there is no universal method for estimating your startup costs. Some businesses can be started on a smaller budget, while others may require considerable investment in inventory or equipment. Additional considerations may include the cost to acquire or renovate a building or the purchase of long-term equipment.

To determine how much seed money you need to start, you must estimate the costs of doing business for the first months. Some of these expenses will be one-time costs such as the fee for incorporating your business or the price of a sign for your building. Some will be ongoing costs, such as the cost of utilities, inventory, insurance, etc.

While identifying these costs, decide whether they are essential or optional. A realistic startup budget should only include those things that are necessary to start a business.

These essential expenses can be divided into two separate categories: fixed and variable. Fixed expenses include rent, utilities, administrative costs and insurance costs. Variable expenses include inventory, shipping and packaging costs, sales commissions, and other costs associated with the direct sale of a product or service. The most effective way to calculate your startup costs is to use a worksheet that lists both one-time and ongoing costs.

Small Business Development Center Program of Ohio is funded in part through a cooperative agreement with the U.S. Small Business Administration. The SBDC program is also funded in part by the Ohio Development Services Agency. The Warren County Center is also grateful to our loyal Alliance Partners who provide financial assistance and resources. All opinions, conclusions, or Recommendations expressed are those of the author(s) and do not necessarily reflect the views of the SBA. Reasonable accommodations for persons with disabilities will be made if requested at least two weeks prior in advance. Contact the Warren County SBDC office at (513) 934-4793 regarding these arrangements.