The Steps to Estimate Start-Up Costs Before You Launch Your New Business

June 9, 2022 - 5 minutes read

According to one recent study, start-ups created over two million jobs in the United States in 2015 alone. In fact, by 2018, there were 30.2 million such organizations operating in the country — making up a significant part of the economy.

But having an idea for a product or service and bringing that vision into reality are often two different things. It’s one thing to come up with something innovative — it’s another thing entirely to avoid the trials and tribulations that the business side of the equation often brings with it. That’s why it’s so important to estimate start-up costs before you launch your new business — it can help you avoid as many of these issues as possible.

Estimating Start-Up Costs the Right Way

By far, the most important step that you can take when it comes to estimating start-up costs involves first listing out all spending you’ll need on the assets that you require for your business to function.

If you’re opening a retail store, for example, obviously you’re going to need things like shelves. You’ll need tables, point of sale systems, light fixtures, so on and so forth. All of these are fixed costs, and they’re also essential — you literally can’t get by without them. Therefore, listing them out at the beginning of this process is a great way to give yourself a financial foundation for your endeavor.

The same is true if you’re opening a business where you will be manufacturing products. You need raw materials from which to produce those products. You’ll need to think about labor costs and all the equipment needed to bring your vision for those products into reality. All of this is essential and these are costs that you can’t overlook at the beginning of this process.

Next, you’ll want to think about the spending that you have to do on expenses. Remember, not everything you invest in will wind up as an asset. If push comes to shove, you can always sell a piece of heavy machinery on a factory floor or shelves in a store aisle. The same is not true for the legal expenses that you’ll need to invest in to properly set up your business as an LLC or a partnership.

People also often forget about the costs required to set up a website, for example. Not only do you have to pay someone to develop it to make sure that your branding aligns seamlessly with your target audience, but you need to pay someone to maintain it. You’ll need to pay monthly fees to continue to host it on your domain. These things can quickly add up.

Once you have carefully considered all of these factors, you can tackle what is perhaps the most important question of all: how much money are you going to need to get started. Never forget the old saying that “Rome wasn’t built in a day.” Your successful business won’t be, either. Based on the above, you need to know how much money you must have in the bank to account for your expenses in those early days. This is especially true as your start-up begins to gain traction, hopefully generating enough money in sales to cover both costs and expenses moving forward.

It’s a difficult process, to be sure — and it’s one that many people tend to get wrong. Coming into the situation with a level head and a good idea of your goals enables you to enjoy all the benefits of this process with as few of the potential downsides as possible.

If you’d like to find out more information about all the important steps to properly estimate start-up costs before you launch your new business, or if you just have any additional questions you’d like to go over with someone in a bit more detail, don’t delay – contact us today.

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