What are the Different Types of Business Start up Costs?
When launching a new company, there are numerous business start up costs to take into consideration. They can generally be categorized as either one-time costs or ongoing expenses. A one-time cost could include a building purchase, for example. In addition, some of the ongoing costs may be temporary, until the business starts getting customers and earning a profit.
Different types of companies have varying types of expenses. For instance, some businesses might require staff members right away, while others depend more on equipment or infrastructure. Regardless of the type of business, the new owner will usually want to outline his or her projected expenses in a business plan. This can help him or her estimate total expenses, and then he or she may be able to request business financing assistance to help defray some of the costs.
Business start up costs typically include the purchase or lease of an office space or other type of building. Someone opening a new business usually needs furniture and office equipment, such as a computer, phone, fax machine, and copier. Different types of businesses have unique equipment needs. Someone opening a restaurant, for instance, has to purchase items related to food preparation and service, including fixtures and appliances.
In addition to the physical space and equipment, business start up costs normally entail paying deposits, such as for utilities and rent. Another common start up expense is a new business permit or license. The required amount will usually vary, depending on the location of the company. Business start up costs can also include a marketing plan to advertise and promote the new venture. Many new business owners also incur fees for hiring attorneys or accountants. Another potential cost could be the remodeling or interior design of the space.
When calculating business start up costs, one also has to take into account several months worth of ongoing expenses in addition to the one-time expenses. This is because a business that depends on customers for revenue, for instance, requires a period to get off the ground before having a regular flow of customers or retail orders. Some examples of ongoing costs include property and liability insurance, utilities, and inventory. Some other potential ongoing expenses might include transportation as well as salaries or wages and employee benefits, if applicable.
Many people are subject to online business costs as well, such as building and maintaining a professional website. Other issues to consider include categorizing expenses as essential versus optional. Essential costs can then be categorized further as either fixed or variable expenses. Fixed expenses, such as rent, usually remain the same each month, while variable expenses can include inventory or anything else that is subject to change.
It is usually important to calculate one’s business start up costs in order to estimate how much money will need to be invested or borrowed up front. Many people seek financing to help them defray some of the costs. The precise calculation of business costs can also be helpful for tax purposes when determining which costs can be deducted.
Ultimately, one can put all of this information into a cohesive business plan. It normally helps to start with a simple spreadsheet, but also to be ready with a longer narrative for funders who may request detailed explanations. Many financial resources are available, including several that are online, to help someone outline and calculate their business start up costs. According to many business experts, there are usually some unanticipated expenses that will arise. Therefore, it helps to have a certain contingency amount available as well.
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