How Much Money do you Need for Launching Your Startup?

Launching Your Startup: Almost everybody wants to launching your startup or work for one in modern times. This is because they are exciting and open the doors for new opportunities and increase the earning capacity.

However, starting a new startup is a multi-faceted process and involves multiple things. One of those things is the initial investment.

If you have a new business idea the first thing you would want to know is how much would it cost to launching your startup. So here we have made a quick guide to help you figure out your startup costs:

Identify your expenses

Start by writing down everything you can think of that you’ll have to pay for. The more thorough you are at this stage the more accurate your cost estimate will be. You can make a list of the following standard categories:

  • Rent, utilities, and repairs for your business location
  • Inventory and other supplies
  • Equipment purchases or leases
  • Hiring costs, including employee salaries and benefits
  • Legal fees and accounting fees
  • Marketing costs, including advertising, public relations and web design/hosting fees
  • Insurance premiums for liability insurance or other types of insurance (property, health) you may need for your business
  • Permits and licenses required by law to operate in your geographical area
  • Professional fees for lawyers, accountants, consultants or advisors you may hire
  • Utility deposits (electricity) required to begin service at a new business location

Depending on the current government policies you may need to add more standard expenses to the above-mentioned list or remove some.

So as a founder of a business you need to be aware of the latest policies and keep an ear to the ground about members of GST council, commerce ministry and their latest announcements.

Estimate your costs

Once you’ve developed a list of your business expenses, determine the total amount or range of costs for each item

Research what it takes to start up a business by talking with others in the same industry. Another way to estimate is by looking at businesses that are currently operating.

Look around town at local businesses or search online for companies that are similar to yours, and try to get an idea of how much they spend on overhead, marketing and other expenses.

Ask them how much they spent starting up their businesses and what they spent money on. This type of primary research is invaluable in determining how much money it will take to get started.

Break down the costs

Sort the expenses into two categories: fixed and variable. Fixed costs are monthly expenses that don’t fluctuate with sales volumes such as rent and utilities.

Variable costs will change based on the number of products you sell or services you provide such as marketing materials or product inventory.

You can also choose to divide your expenses in terms of direct expenses and indirect expenses.

Next, create a list of projected expenses for the first year of business. These include marketing, administrative salaries, utilities, taxes and miscellaneous items.

Include one-time payments

Jot down any large one-time payments you will have to make during the first year of business. This might include equipment purchases or fees paid to suppliers or vendors.

Factor in capital costs

You may also need money on hand to pay for capital costs, such as machinery or inventory. Make sure you factor these in when estimating your startup costs.

Calculate contingency funds

Finally, set aside some money as a contingency fund to cover unexpected expenses that may arise during the first year of business.

Set this amount at 10 percent of your overall budget if possible – it will help you avoid running out of money before you get your business off the ground.

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