You’re almost ready to start your new business venture. Congratulations!You have thought of a great business idea that you know your customers are going to love.But the path ahead of you won’t be easy. The key to a successful business is preparation. Un-accounted or sudden Startup expenses are the most common reason why startups fail. Before you open the doors of your business, you’ll have bills to pay.Understanding startup business expenses will help you launch and grow your business successfully.Calculating startup expenses helps you:
- Evaluate the break-even point of your business
- Estimating revenue or profits
- Securing loans
- Attracting investments in your business
- Save money
When you start your business, you will have to register your business as per the rules & regulations of the government. Depending on your industry, you might have to incur expenses on additional licenses as well.2. Rent:
You might not have to worry about the rent, if:
- You’re starting out as an individual, or
- You plan on letting your employees work from home
- It’s one of the main operating costs in a business
- It’s a fixed cost
In addition to the fixed cost of the rent, you’ll be responsible for paying additional expenses of your office space like: Electricity bill, Water bill, Gas, Internet & phone bills.4. Employee Salaries:
You need to pay your employees, even at the initial days of your business when you’re not bringing in much revenue.Employee salaries will probably be one of your most costly startup expenses for years to come.Payroll includes:
- Wages of your employees
- Additional benefits: bonuses, commission, overtime pay.
Office and supplies add up fast.
- Even if you’re working from home, you might need desks, chairs, computers, phones, filing cabinets, printers, ink, pens, and papers.
- If you’re operating in a traditional 9-5 office environment, you might need a microwave, water cooler, etc. apart from the desks, chairs, computers, and phones.
6. Inventory:If you’re in retail, wholesale, manufacturing or distribution, you will have to maintain inventory to sell.Knowing exact inventory requirement is tricky:
- Excess inventory: carries a risk of spoilage or damage and keeps your capital blocked
- Less inventory: carries a risk of losing customers
Marketing and promoting a new startup is almost a non-stop task.Marketing material might include Banners, Business cards, BrochuresDigital marketing increasingly forms the basis of many startup's efforts to attract and retain customers.Also, it’s almost unheard of a business today that doesn’t have its website; so whether you design your own website or pay an agency to design one for you, you’ll need to factor in the time and money to develop an online presence.8.Technology:
In addition, there is a growing list of other technology expenses you should be aware of when preparing your startup:
- Software licenses
- IT support
- Data storage
- Email accounts
- Payment gateways
- Any third-party integrations or services
While planning your budget, you’ll have to assign a specific amount or a percentage of your budget to allocate towards taxes.The amount you pay depends on your revenue, deductible expenses and your business entity.You should work with a professional Chartered Accountant (CA) to manage your business taxes, which is money in and of itself in the list of your startup expenses.