Starting your own business consumes a lot of time, energy and money. Setting up a new business, and running it successfully can be an exciting moment, yet challenging. Many first-time entrepreneurs experience uncertainty and a feeling of being swamped by an unending To-Do list, while they try and put their feet firmly on the ground.
Estimating the actual start-up cost can be tricky. Make sure you don’t overlook any key expense and plan well, for fewer hiccups. Key initial costs, as you start, would include:
COST OF HIRING PROFESSIONALS
A set of motivated and ardent professionals form the foundation of any successful business. You may need to hire a variety of professionals, as you start. You may need are a lawyer and an accountant, preferably a Chartered Accountant and/or a Company Secretary. Expert advice could play a vital role in your business’s success or failure.
A lawyer can help you with the necessary paperwork, ensuring you comply with the local laws. The professional can help draft business contracts, partnership MoUs and more. The lawyer’s advice is crucial for making business decisions. The lawyer, can help keep trouble at bay, and defend your firm, in cases of legal battles. Different lawyers charge differently. Most lawyers ask for a retainer fee, which is a lump sum that you pay upfront. Experts advise budgeting your initial legal costs, ahead of starting a business.
An professional accountant offers financial planning advice. She/he can help you set up your books of accounts, work your taxes and file the tax returns. tenured professionals can advise you on how to operate the business to reduce your tax obligations. Experts believe it is a good idea for start-up founders to consult an accountant on a monthly/quarterly/annual basis to review financial statements and seek financial guidance.
You may need to incur additional costs for hire technical experts, marketing professionals, customer support staff and more. Plan the initial number, and costs involved.
The cost to register/incorporate a new business depends on the type of company you want to start, like a sole proprietary firm, partnership firm, a limited liability company or a private limited company. The costs vary significantly for all the above since each type of business setup has a different tax, legal and financial implications. The cost of incorporation would also depend on other factors, like authorized share capital, number of directors and stamp duty of the state of incorporation, etc. A few business setups do not need an incorporation certificate, but still, need state licenses and permits. Understand the specifics depending on the type of business you are operating and plan accordingly.
Just like you take health, home, and car insurance, your business needs protection against unforeseen situations. The type of insurance your company needs depends on the type of business, industry, and number of employees in your company. For example, a home-based self-employed computer consultant may have different insurance needs Vis-à-vis a 10-employee company that manufactures explosives. The most common insurances that businesses opt for, include property insurance, Business Interruption Insurance, Liability Insurance, Key Person Insurance, Workers Compensation Insurance, and Health Insurance.
Planning your insurance needs at the beginning may help you save potential damage costs at a later stage. You can sometimes save money by having all of your insurance needs met by one company.
MARKETING AND ADVERTISING COSTS
Every new business has a unique advertising and marketing requirements, and hence different costs. Marketing costs could include signboards, banners and good quality business cards designed by professionals. You may want to have your business name placed in the yellow pages/directory under the correct industry category. You may also consider paid video or media advertisements.
Apart from traditional marketing, creating and maintaining an internet presence through a website is becoming increasingly important. A business website should look professional, should be user-friendly and should give necessary information about your business. Presence on social media and other online marketing strategies can help generate interest in the buyer community at a relatively lower cost.
PLANNING OFFICE SPACE AND INVENTORY
One of the biggest outlays can be the cost of setting up your physical space. A few businesses need to rent a storefront, while others may continue to operate out of co-working spaces, or homes. Working from home and hiring co-working spaces are easy on the pocket for small businesses, the rental places include a heavy payout at the start. You may need to pay several months of rent in advance as a lease payment. You may need to shell out brokerage and /or install fixtures and pieces of equipment. Bear in mind that some places may need remodeling or cosmetic improvement by an interior designer, which costs extra.
Buying or renting office furniture and supplies also add up fast. A functional office needs desks, chairs, computers, and phones. Smart careful planning is crucial when you are first starting, you may need to buy bookshelves, printer, ink, paper, and computer software.
Employee salaries comprise a large pie of operating expenses. You need to pay your employees even as they settle in their new roles. The cost of hiring employees includes their payroll, stipend, bonus, compensation, insurance and overtime pay. The business may need to spend a sizeable amount of time and money on employee training. A sole-proprietary business can follow conservative “just in time “ hiring practice, utilizing part-time employees or single-project labor. The way to determine employee-related costs is to project your staffing needs. Take into account employee turnover and quantum of anticipated work.
RAISING MONEY/ CAPITAL
Estimate the amount you need to start the business and then look for an appropriate way to fund this. The interest you pay on the loan taken becomes part of the money that you need to repay. Banks today are willing to give loans to small businesses if you can convince the banker that your business has a strong, reliable cash flow plan for loan repayment. Most banks and financial institutions offer a certain percentage of the total capital required, hence, you may have to look at other ways to raise the remaining capital.
You may want to utilize your savings. Or you may approach your friends and families who could lend you interest- free loan.
Equity money is another way of financing. Equity money comes in the form of private investments from interested strangers who may have an interest in your company. Home equity loans may be your biggest source of capital if you own a house. Find out the interest rates and other hidden costs that you will have to pay at closing. Credit card loans should ideally be your last resort because the interest rates are comparatively higher.
A few costs don’t fit in any major category but, you must budget them in, to get an accurate picture of the expenses. Think about the specific heads pertinent to your business, and plan accordingly. For example, if you have an operations consulting firm, you and your team might need to travel at short notices. Factor in the price of tickets, accommodation, and food costs.
Additionally, even after meticulous planning, unanticipated expenses might arise. As a thumb rule, budget unanticipated expenses as 10% of the total estimated costs.
To understand exactly how much costs would be incurred for you, get in touch with us: www.thefilings.in | 044-46315959