How to calculate startup costs for a business
Calculating startup costs is an important task for your business plan, but it will also tell you how much your business is going to cost to run on a monthly basis. Making an accurate calculation, in the beginning, can also help when you set prices and determine how you want your business to be represented with your target demographics.
How do I calculate Business startup costs?
The best way to start is by creating a spreadsheet to list out your one-time expenses, for instance, security deposit, new equipment, banners, furniture. Things that you will only need to buy once, at least for now. You can also use this document to help figure out how much you might need from an investor or lender.
What do investors look for?
When starting a business, you could run into issues with investors or lenders if your overhead is too high for your industry. For example, let’s say you’re in the construction industry and your focus is roofing. The industry standard is around $50,000. But you’re looking at a $250,000 startup cost. That could be a red flag to investors and lenders. Of course, this all depends on your business plan and your strategic marketing campaign.
Where can I start looking for funding?
This all depends on the kind of funding you are looking for. Do you want an investor that is willing to invest in your business on an ongoing basis? An active business partner that is also your investor, or a bank?
If you’re going with an investor (the silent business partner) then you’re likely going to need connections. You’ll also need to have a serious business plan and financials backing you up when you pitch your idea.
Much like the silent business partner, you need connections. Start by attending networking events to make those connections. Find a business partner you trust who also has the liquid capital to invest in your business venture.
With a bank, it is more straight forward. You contact a loan officer, show him your business plan, and fill out the application. Sometimes they check your credit, and then you’ll get a decision. A great place to start when looking for funding is on the SBA’s website.