It costs small businesses in the United States between $2,000 and $5,000 in start-up costs. Each industry is different and has an average budget in this range. Additionally, monthly expenses for the first six months should be on hand before opening your doors to customers. Many small businesses fail in their first year as they were not financially prepared for the early months. Here we take a look at the most important start-up costs and expenses you need to plan for.
Start-up Costs
Licenses and permits will usually be paid out of your start-up budget. Later you may need to extend licenses for computer software and hardware as your staffing quota increases.
Market research is a good idea before opening your shop. Thereafter, you will only need to do annual surveys on customer and staff satisfaction. Similarly, an annual review of the market, the industry, and your competitors may be adequate in a slow-moving environment or more frequently in a fast-paced one.
Fixed and Variable Monthly Expenses
Office supplies fall under your variable expenses as the amount will differ every month. This will include, inter alia, stationery, cleaning and sanitizing products, entertainment allowance to cater to strategic business partners, and coffee/tea for staff.
Getting insurance for small business to protect your employees and yourself as the owner from liability is essential. This will be a fixed cost, although annual increases will occur.
Stock/inventory may be bought at irregular frequencies, especially in the beginning when customer sales are still low and increase as your brand attracts more consumers.
Employee salaries are a fixed monthly expense, although, in some instances, it varies, such as when paying for overtime. Likewise, you will need to retain a bookkeeper, accountant, Labor Relations (LR) expert, and a Human Resources (HR) company. Your options are to perform these tasks yourself, hire a salaried employee to do them, or outsource these functions.
Items with an Expense and Start-up Component
You will need to lease or buy office space. If you purchase a property, you will have to pay capital for the building and land as an asset. Any line of credit you took to buy it will need to be repaid with interest. Plus, you will be liable monthly for rates and taxes. On the other hand, a deposit will be required to rent the area your store takes up, with a monthly rental.
Some form of communication is necessary, e.g., a telephone line with extensions or a business system such as a PBX. You can choose between fixed lines or fiber. This has an upfront cost for installation and a monthly expense aspect. A fax machine will be handled identically.
Printers can be loaned or bought outright; again, both components apply.
Your marketing budget will probably involve a big start-up amount with smaller quarterly advertising campaigns. Printed marketing materials would likely be designed and ordered with each project. A website is a marketing tool you should have in place, and it comes with a design cost and a monthly maintenance fee unless you are doing this in-house.
A business that has planned properly for its start-up financial needs and the early monthly expenses is more likely to succeed.
Also Read: Top 10 Successful Start-ups In 2021
