A lot of people aspire to open a business. Their reasons are to enjoy more time with friends, gain a level of freedom they’ve always wanted, and gain financial independence.
However, many get stuck and never truly understand cost to start a business.
Whether you’re launching an online business or a brick-and-mortar shop, there’s no generic calculator that can compute your costs.
The estimated capital is a vital factor in establishing a venture and you need to understand your numbers.
So, how do you know how much you’ll need to set up shop? I’m giving you the lowdown on the essential factors to consider to know how much you’ll need to start your own venture.
How much does it cost to start a business online? Here are six steps you should take to get a realistic estimate of the cost to start a business.
Get your idea
Before you begin working on your business start-up costs list, it’s essential to get a clear picture of your business idea first. Ask yourself what type of venture you want to put up. Will you be offering tangible items, digital products, or services? Will the business be online or brick-and-mortar?
Many entrepreneurs advise pursuing a venture that’s already in line with your interests. For example, setting up a bicycle shop is a great idea if you’re already into biking. Your knowledge about parts and accessories will be invaluable when choosing items to sell. Furthermore, since you are already a part of the niche, you’ll have an idea of how your target audience thinks, putting you ahead of the curve.
Write down your plan on paper
You may have a good memory, but you’re bound to lose some of the ideas along the way. To prevent the bright ones from slipping your mind, make it a habit to have a pen and paper on hand whenever you brainstorm. A smartphone can also do the trick, but an actual writing tool can be handier if you want to illustrate your ideas better.
Writing down your plan will also allow you to better get a grasp of the cost to start a business specific to your idea. When jotting down during brainstorming, make sure you cover all bases and take note of everything you’ll need. This can include item production costs, packaging design and production, and handling fees. You should also take note of digital costs such as website creation and social media ads.
Project cash flow
It’s essential to gauge how much you’ll be selling a product and how much profit margin you’ll earn for every sale. It’s expected that you won’t rake in heaps of money during the first few months. However, you need to plan ahead and allot enough allowance for the monthly costs of running a business.
For example, are you going to hire regular employees? Will you rent an office or will you go for a co-working arrangement? Aside from rents and salaries, you should also take account of other regular fees. These expenses may include monthly website fees, business permits and taxes, office supplies, and other costs.
Survey 200 people
It’s not enough to talk to family and friends about a business idea you want to launch. Though their input can be invaluable, it will do you good to go out there and get insights from strangers. After all, once you launch your business, you won’t be limited to selling to your social circle. You’ll have to market to people you don’t know.
The ideal number of people to survey is 200 if you want a realistic feasibility study for your business. But how do you approach this many people and get their pulse about your proposed venture? You can create a simple Google forms questionnaire and send it to family and friends. You can also ask them to send the form to other people they know. In the same vein, you can also create a simple survey on a mock website asking visitors to answer the survey in exchange for a digital product you can legally distribute.
Start-up costs for a business can be much affordable these days thanks to outsourced services. For example, you won’t have to hire your own human resources staff anymore. There are various subscriptions that allow you to manage your workforce and release payment through automation.
Similarly, there are ventures that offer services for your marketing needs such as graphic design and content writing. Outsourcing everything can take loads off your plate so you can focus on things that really matter.
Founder to focus on sales
By taking extra tasks out of your hands, you give yourself enough mental and emotional energy to deal with the most crucial part of the business: sales. Some founders tend to think that they should focus more on innovating the company. Though stirring the business in the best direction is indeed essential, it’s also imperative to focus on money coming in.
Though you can outsource cold calling and other forms of lead generation, it’s vital that you stay on top of everything. Being directly involved in sales gives you a better gauge of your target audience. It also improves your negotiation skills and allows you to make informed decisions about your products.
Now that you know how to calculate start-up costs for small businesses, you can better decide about the avenues to take as you pursue your venture. It’s best not to rely on any generic business start-up costs template. Instead, study your business carefully and use it as a guide for planning your capital.