As of Monday, March 5, 2018
It is an exciting time when someone decides to start their own business. This time can be an accumulation of months, sometimes years, of thinking and planning of what you want in your new business. Now, the thinking phase is over and the implementation or startup phase begins. The future business owner often contacts the Small Business Development Center for advice during this implementation phase.
When clients meet with us, they often know what image they want their business to project, where they want their business to be located and what product or service they are going to provide. Most of the time, the owner will have planned every key aspect of their future business. There is a lot of excitement and positive energy surrounding the initial meeting. Their new business dream is starting to become a reality.
It is during this time that hard financial questions need to be asked. How much will it cost to start my business and make my dream a reality? How much money will I need to save or borrow? How much capital do I need to have in order to sustain my business financially during the vulnerable first year? Unfortunately, these are not easy questions to answer. But they are vitality important questions for the long term success of any business.
So exactly what is a startup cost? A startup cost is simply a non-recurring expense an owner will incur before a business is open and before income from the business is recognized. It is important to identify as many potential startup expenses as possible, so funding is secured to cover the expense.
Some of the common startup costs for a new business are:
• Fixed assets such as computer and office equipment, vehicles, merchandising displays, miscellaneous fixtures, land, buildings, leasehold improvements
• Other startup cost may be research and training cost, insurance, first/last month rent, advertising, promotional material, logo development, employee training, legal fees, accountant fees, signage, license and other fees
• Money in the bank to cover business overhead as well any debt service for your business until income is recognized
Remember, every business is unique. And, because each business is unique, the startup cost will also be individualized to that business which makes determining startup costs tricky This list of startup costs may be very relevant to your business or it may not be relevant at all. And while the list of expenses looks daunting, take time to examine the list to identify what cost may pertain to your business and what expenses should be added. Some startup costs can be estimated but it is much more efficient to research true cost for the expense. The owner can do this by calling their insurance agent about cost of insurance, calling a realtor about rental rates and researching online cost of displays and fixtures. The element of an unpleasant surprise is less likely when an owner researches true cost rather than estimating the cost.
It is through thorough and detail financial planning that your new business venture can become a success. And your dream of owning your own business is one step closer to becoming a reality.
Rose Mays is a program specialist at the Small Business Development Center at the Columbia Gorge Community College. She can be reached at (541) 506-6120.