How to Calculate Startup Costs

Calculating your start up costs is essential when you are just starting out with your business. Calculating them accurately and implementing them into your business plan can help you decide how to manage your funding and expenses. Estimating your startup costs can be tricky but today we will help you understand your costs and how to plan for them.

What Is a Startup Cost?

Startup costs are expenses incurred by people who are starting a business. Some examples of startup costs include incorporation fees, legal costs, leasing facilities, buying equipment, and payroll. A comprehensive list of expenses will include both fixed and variable costs, one-time and ongoing costs, and essential and optional costs.

Common startup costs include:

  • Incorporation fees
  • Online business startup costs
  • Payroll
  • Employee benefits
  • Pension plans
  • Marketing
  • Office rental
  • Mortgage expenses
  • Office furniture and supplies
  • Utilities
  • Equipment
  • Labor
  • Basic technology
  • Inventory
  • Travel
  • Insurance
  • Taxes and licenses

Whatever industry and business you are in, it is important to understand what these costs are and how to estimate them yourself so you can set yourself up for success.

How to Calculate Startup Costs for Your Business

After you have made your list of all your expenses, it is time to research the item and estimate the cost. When doing your research, include reviews, warranties, and maintenance costs. Your fixed expenses will be easy to estimate because they will have a specific cost, but variable costs are going to take more research.

After you have done thorough research, total up your expenses so you know what it will cost to open your business. In your calculation, assume that your business will not able to pay the expenses until your business is operational since you are not able to have an accurate sale forecast at the start. Also, factor some extra space for growing needs as your business grows.

Paying for the Startup Costs

Once you have all that information, you can total your startup costs accurately. You might be alarmed at the startup cost total but there are many funding options for new business owners such as SBA micro loans, asset-based financing, business credit cards and more.

Other ways you can come up with the required funding include:

  • Invest part of your revenue in covering your expenses
  • Look for places to cut costs
  • Seek for a grant from the government or a private company
  • Work with a peer-to-peer lending network

The Bottom Line on Business Startup Costs

When starting out with your business, you must take into account calculating your startup costs. Be realistic when estimating the costs so you know how much money you need to borrow to ensure your business is successful.