When you decide to start a new business, there are several things that you need to consider- including your startup cost. Unfortunately, many new businesses skip this step, hoping to get a flood of customers to keep them afloat- which usually does not happen.
If your business is located in southeastern Wisconsin, let Nolan Accounting handle your financials. They offer accounting, bookkeeping, payroll services, and even tax prep for businesses located in New Berlin, Milwaukee, Muskego, Greenfield, Waukesha, and West Allis. They can help you determine your new business startup cost too.
Startup costs are those expenses that you incur while creating a new business. Keep in mind that different businesses have different startup costs- but there are a few that are common across the board.
In this article, we’ll explore some of the most common business startup costs.
Common Business Startup Costs
Below, we’ll take a closer look at 8 of the most common business startup costs.
Business Plan
First of all, you must create a business plan. This is a detailed map of your new business and forces you to consider the various startup costs. If you underestimate your expense, you falsely increase your expected net profit, which doesn’t work out for any business owner.
Market Research
Before you start a business, you need to carefully research the industry and consumer makeup. Some business owners hire a market research firm to help them with this assessment. If you do choose to hire these experts, make sure to include it in your business plan.
Borrowing Costs
When it comes to starting a business, no matter what kind, you need an infusion of capital and there are two ways to get this:
Typically, equity financing involves issuing stock, which doesn’t apply to most small businesses. Instead, most small business owners use debt financing, which comes in the form of a small business loan. Loans can come from banks, savings institutions, and even the United States Small Business Administration, or SBA.
When starting a business, you must consider these loan payments, along with interest, because if you default, the cost is high. You could lose your business and even your personal assets.
Insurance/License/Permit Fees
In order to obtain certain business licenses and permits, many businesses must submit to health inspections and other authorizations. Some businesses only need a basic license while others need permits specific to the industry.
Additionally, you will need to have insurance to cover your assets, employees, customers, and yourself in case any liabilities come up. This will keep you from being sued.
Tech Expenses
These days, businesses have more tech expenses than ever before. These expenses include the cost of your website, software, information systems, POS software, accounting software, and more. Some business owners opt to outsource these functions to help save on payroll and benefits.
Equipment/Supplies
Every business uses some type of equipment and supplies. However, before you add these expenses to your startup cost list, you must decide whether to lease or purchase.
Your finances will play a role in this decision. Even if you do have the money to buy the equipment, other expenses may come up that make leasing a more viable option. On the other hand, a lease may not be the best option, depending on the equipment and the terms of the lease.
Advertising/Promotion
As a new business, promotion is imperative for your success. However, there’s much more to it than simply placing an ad in your local paper. It includes your marketing efforts, which is everything you do to attract clients to your business. Many business owners opt to hire a dedicated marketing company since it’s such a delicate task.
Employee Expenses
If you plan to hire employees, you must consider wages, salaries, and benefits. These expenses are known as the cost of labor. If you don’t fairly compensate your employees, you could end up with low morale and even bad publicity, which can be disastrous.
Additional Startup Cost Considerations
When you start a new business, it’s important that you have some money set aside for unexpected expenses. One of the primary reasons companies fail is because they don’t have the cash to deal with unexpected issues.
Startup cost of a sole proprietorship are different than those for a partnership or corporation. A partnership may incur costs such as state registration fees or drafting a partnership agreement. A corporation may incur expenses such as filing articles of incorporation and bylaws, as well as terms of original stock certificates.
Conclusion
Starting a new business is an adventure- but if you neglect the details, such as estimating your startup cost, you could end up in financial distress. Let Nolan Accounting help you determine your startup costs for your southeast Wisconsin-based business. They can also handle all of your accounting, bookkeeping, payroll, and tax prep.