If you’re about to embark on a new business venture then there are certain costs you need to prepare for. Whereas it is possible to run a startup from your home with minimal resources, there are certain legal fees and other inevitable expenses you can’t avoid.
By factoring these common costs into consideration you will be able to draft a realistic budget for your new business and be proactive about your spending in the future.
Here are seven common startup costs you need to know about.
Office Space Rental
There are several cost-effective options for small businesses looking to rent office space. You could opt for a coworking space which is ideal as you can pay for it when you need it or on a monthly basis.
These are competitively priced as they’re becoming a popular solution for startups and smaller companies.
If you’re interested in finding startup office space you can perform an online search to compare the best deals near you.
Incorporation Fees
When setting up a business you need to pay small government filing fees in order to operate legally.
These aren’t a lot but you need to be registered officially to comply with government regulations.
You can set yourself up as a business entity online to be entitled to certain tax reductions as well.
Depending on the type of business you run you may also need licensing, so it’s advisable to do your research here as well.
Insurance
It’s unwise to set up a business without protection. You’ll need insurance to cover your staff, property, and any liabilities.
The type of insurance you need depends on the nature of your business. Perform a risk assessment to determine which insurance policies you require.
These may include general liability insurance, commercial property insurance, errors and omissions insurance, and workers compensation insurance. Here is a comprehensive guide to startup insurance.
Technology and Equipment
Whereas it is possible to start a business with no money if you’re already fully-equipped to trade, you may want to consider upgrading your technology.
You will need to invest in state-of-the-art tools to help you with various areas such as project management, marketing and analytics, and cybersecurity.
It’s important to ensure your team is working with the right equipment as well. You may be able to rent this at a coworking office space. If not, it’s essential to set up an ergonomic workstation for everyone at home, for health and safety reasons.
Inventory
Your inventory is made up of the products that you sell. You will need to spend money at each stage of the supply chain.
This includes manufacture, storage, packing, and shipping. If you perform an inventory budget analysis, you can calculate how much your inventory will cost you.
It’s wise to slightly overstock your inventory if you’re just starting out. This way you’ll be prepared if there’s a rise in demand and you can generate more revenue without making customers wait.
Staff Wages
If you’re hiring staff you’ll need to figure out your payroll budget. This will let you know how many people you can afford to hire and how much you can afford to pay them.
You will also need to take into consideration factors such as staff benefits, sick pay, and paid vacation.
If your payroll budget is limited, you can choose to outsource certain services as a cost-effective alternative to hiring permanent members of staff. This will also save you money on overheads.
Outsourcing Services
Outsourcing is a great way for small businesses to have access to a wide talent pool without the need to hire permanent employees.
You can outsource a number of services, and as a growing startup, this will probably be necessary.
Commonly outsourced departments include IT, accounting, payroll, legal, marketing, business consultancy, and more.
The cost of these services can vary but you will be able to set up a monthly payment with certain agencies or pay for a job on a one-off basis. Here are some outsourcing pricing models to give you an idea.
As you can see there are a few important factors to consider while you’re preparing the budget for your new business.
Your expenses will depend largely on the type of sector your work in and the size of your company initially.
If you want to scale your business in the future, however, it’s essential to be prepared for this too. Think about your long-term goals and make sure you consider all the hidden costs involved in setting up a business.
