One fundamental aspect of a business you have to figure out when starting any business is the startup cost. The startup cost of a business is the estimated amount you need to start the business. Although there are some businesses you can start with no startup-cost, most business ideas require some cost. This post outlines some costs you need to add to your expenses column when starting a business.
Factors That Determine Startup Cost of a Business:
Several factors determine the cost that goes with starting up a business. These are some general factors that affect the costs of starting up a business.
a. Type of Business: The type of business you intend to start will determine the cost of starting the business. For instance, it cost less to set up a service-based business than it costs to start a high-cost customer production business.
b. Business Structure: One significant cost that goes into starting up a business is the cost of incorporating the business as a legal entity. The business structure determines the amount you spend on incorporation expenses. For instance, it cost less to register a business as a DBA than incorporating the business as a Limited Liability Company LLC.
c. Location: Another factor that determines the startup cost of a business is the location of a business. It costs more to set up a business in some locations.
d. The scale of Business: The scale you intend to run your business will determine the cost you put into setting up the business. Ordinarily, you will spend less if you want to start your business on a small scale than when you start on a large scale.
Also read: Franchise Advantages and Disadvantages
10 Essential Startup Costs To Consider When Starting a Business:
One of the first things you have to do when starting a business is to incorporate the business to operate as a legal entity. This costs some money. The amount you spend on incorporation is determined by the business structure you choose for your business. The post explains the details of the business structures available. If you intend to run your business as a DBA, then the cost of registering ranges from $15 to $75. The cost defers depending on the state. For LLC on the other hand, the cost is range from $70 to $500.
There is a need to get insurance for your business from the onset. The insurance covers for liabilities you may incur in the process of running your business. There are different types of business insurance options, but the general one for most businesses is the General Liabilities insurance. The cost of getting business insurance range from $500 to $5,000 a year. The amount is generally cheaper if you run your business as a sole proprietorship. Other insurance covers you should consider for your business include, Worker’s compensation insurance, Errors, and Omission insurance and insurance against theft by employees.
Unless you intend to run your business from home, you need to spend money on renting an office space. The cost of renting an office space depends on the location and size of the space. For a location like Atlanta, you may have to budget $2 monthly per square foot while for a place like Texas, you may spend up to $3 per square foot. On the other hand, you may budget at least $500 to cover for rent for each employee on your payroll.
Office Furniture and Supplies:
The furniture and supplies for your office depend on the type of business you run. You may have to budget at least $800 for furniture for each employee. The cost of supplies will be higher if there is a need to get computers and other electronics for the office.
There is no definite cost for tax. The amount you pay on tax depends on the State where you operate your business, your tax method, and income.
Just like you pay utilities for your home apartment, you have to do the same for your office space. For utility bill, you budget at least $1.55 per square foot.
Marketing and Advertisement is a major aspect of a business. The concept of build it and they will come is no longer applicable in our corporate world today as a result of competition. Therefore, there is a need to create awareness of the products or services you offer. This costs money. The amount you spend depends on the advert medium you pick. For instance, if you choose to go through with offline marketing modes like fliers and billboards, you need at least $3,000. This will cover the cost of both hiring a graphics designer to do the graphics work and also for printing. For digital marketing, you need at least $1,500 to cover for adverts on different online platforms.
Equipment and machinery do gulp a bulk of business capital. You need to budget at least $10,000 for machinery depending on the type of equipment you need. If you are starting on a tight budget, you can consider hiring the equipment instead of outright purchase.
The pay depends on the employee’s skill and experience in the industry. Some key employees you need on your payroll are; an accountant or bookkeeper, a consultant, and other skilled workers in the field.
You can’t afford to run a business without a site in this age and time. Thus, creating a site is another expense you have to consider. Thankfully, it doesn’t cost much to set up a website with the help of CMS platforms. With just $500 or a little above that, you can set up a business website.
These are some of the standard costs required to start a business.