The 2020 pandemic didn't expose business owners to the idea that foot traffic is dwindling and brick and mortar storefronts are fading. 2020 did, however, show that all business owners could benefit from an online presence. When doors started to close, small...
Costs of Starting a Business
How do we begin to figure out the costs of starting a business? When you sit back and look at what it takes to get a business off the ground, you realize coming up with the idea was the easy part! You need to be ready to put in the extra hours, look for help, and of course, money.
You’ll find several roadblocks on the way to launching your business; however, the biggest hurdle will probably be financial. Luckily, you have a few options out there to help raise capital. But it all starts with your commitment to the product and the process.
Looking at the mountain ahead of you can be daunting, so let’s break down the costs of starting a business into something a little more manageable.
Start by mapping out the base costs. Infrastructure is the foundation of a business. Think about what it takes to get your company launched and start small. We’re mostly referring to operating costs. What do you need to get the business off the ground?
Depending on your business model, this might be equipment and supplies or creating marketing campaigns to get the word out. In today’s world, websites are a necessity, so when you map out initial costs, remember to budget for launching a site too.
You can save a little on upfront costs by using a website builder, but given the need for a first-rate, you’re better off going through a professional management firm. Professional firms can help maintain your website freeing you up to focus on more critical aspects of your startup. You can expect to budget roughly $300/mo for a functioning website.
Estimating other initial costs is entirely dependent on your business type. Are you opening a legal consulting firm? Are you ready to get your HVAC company off the ground? No what matter what, you have plenty of research to do.
Make a list
Once you have a chance to research your startup costs, make a list of every other infrastructure cost you can estimate. If you’re opening up a coffee shop, startup costs are relatively easy to predict. You have to look at commercial space for the shop and price out equipment and inventory. If you’re launching a tutoring company, measure the costs of marketing, transportation, and supplies. Every new business has to face expenses like this. Making a list of what’s needed will help estimate the costs of starting a business.
Some costs to remember:
Business License: $25-$300 depending on the state
Business Insurance: Roughly $500-$3,000
Employee wages: You’ll want to calculate yearly costs and estimated payroll tax.
Legal costs: Services like Legal Zoom have services starting at $79/mo.
There are a few critical items to remember to put on your list. Businesses need to be prepared to pay for any licensing for state or federal regulations. You might also look past joining groups like the chamber of commerce, but for the (usually) small investment, you can create a large network and launch more quickly. You can expect yearly fees anywhere from $50-$400 depending on your business size.
More importantly, mapping out your launch to-do list helps make sure nothing slips through the cracks. As we mentioned, startup capital is your most precious commodity, and a small oversight can devastate your company before you get started.
Get a number
The Small Business Association provides an excellent startup cost calculator. For the most part, though, you can expect to need roughly $3,000-$10,000 at the bare minimum to get started. On average, you’ll also need six months of operating capital on top of everything else forecasted in your business plan. You can’t underestimate how much you need to get started. Most businesses fail because they simply run out of money.
If you can, try to find a mentor, someone who is familiar with the field and maybe started his or her own business. Mentors can help give you a better idea of the costs of starting a business through experience. There’s only so much research you can do, so regular conversations with someone with firsthand knowledge is invaluable. If nothing else, a mentor will help take some of the “guestimation” out of estimation.
Understand cost is more than money
There’s no way to put an exact price tag on how much your business will cost to start. You can raise capital from investors or loans or personal funds, but money isn’t the only investment you’ll make. This startup is going to take over your professional life.
Time will most likely be your second most valuable asset next to money. While you have to remember to strike the right work-life balance, it’s important to remember how many hours you’ll have to dedicate to the company. Most new business owners work between 60-80+ hours.
You’ll also have to make sacrifices for your business. Will it be your time? Are you putting your own money into the company? Will you have to work another job to supplement income? You won’t know until the business is off the ground, but be ready to adapt to any situation.
Your commitment to the business is the most reliable resource you have. Launching a business takes dedication and the ability to make bold moves. Not every small business succeeds. Your job is to use all the resources you have at your disposal, including your blood, sweat, and tears to make your company successful.
We mentioned at the beginning that the costs of starting a business are daunting. You have to plan, research, raise money, and work tirelessly just to get your startup off the ground.
But you can do it.
Remember to account for necessities like a website, legal services, and marketing costs. Budget your money and time to be as effective as possible, and never be afraid to ask for help. Small businesses are the backbone of the economy, and it takes entrepreneurs like you to power them.
Shamrck is a managed WordPress hosting and development firm committed to helping you get your business off the ground by using a professional, functional WordPress site to help close sales, market to customers, and represent your brand. We’d love to talk more with you about the impact a professional WordPress site can have on your startup. Schedule Office Hours with our experts to learn a little bit more!
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