In order to determine how much
seed money you will need, you must estimate the costs of your
business for at least the first several months. Every business is
different, and has its own specific cash needs at different stages
of development, so there is no universal method for estimating your
startup costs. Some businesses can be started on a shoestring budget,
while others may require considerable investment in inventory or
equipment. It is vitally important to know that you will have enough
money to launch your business venture.
To determine your startup costs, you must identify all the expenses
that your business will incur during its startup phase. Some of
these expenses will be one-time costs such as the fee for incorporating
your business or price of a sign for your building. Some will be
ongoing, 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 that business. These essential
expenses can then 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 all the various categories of costs (both
one-time and ongoing) that you will need to estimate prior to starting
your business. The following tool will assist you in performing
that task:
Startup Cost Estimate Calculator
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