Starting a business is quite a daunting move in itself. It requires a chunk of investment, lots of courage, and a dose of luck. While you can muster up the courage to become an entrepreneur and pray to God to have luck by your side, arranging the investment is where everyone loses hope.
The amount of money required for opening up a startup depends on the industry you’re planning to enter. Your investment plan must include paying for the location, equipment, and other primary resources. Everyone already has a rough idea of the investment in their minds, but sometimes, people overlook common costs and end up in trouble.
Of course, you’ll require additional research to estimate the capital you need to start a business. Luckily, we’ve made this task easier for you with our effective tips. Here are a few things you can consider!
Estimate your startup costs
The costs of a small business vary from location to location. For instance, opening a setup in Toronto may be more expensive than in any small town. Also, the industry you are entering also plays a vital role in rolling out a budget plan. Besides the kind of industry you are aiming for, you must consider other factors such as:
- Tools and equipment
- Office space
- Business registration and licensing fees
- Shipping costs
A small business startup in Canada usually costs around $5,000 to $10,000 initially. Most business owners fail miserably during the initial phases of their startup because they run out of cash very quickly. Always leave some capital as a backup fund, or keep an eye out for an investor to fund your business in case you face a crisis.
When thinking of opening a startup, you need a location for building the establishment. However, requiring a hefty sum of money can be quite time-consuming. Renting a small space or sharing a co-space with another existing firm is a more innovative option. When visiting different sites to open your firm, you need to make sure the space accommodates your needs.
If you aim for a commercial space, expand the budget a little since commercial properties are expensive. While you shouldn’t skimp on some essential aspects, there are a few things you can compromise on. For instance, choose a location with shared parking. It would be a lot cheaper than a building with private parking.
So how much should small businesses pay for real estate?
It is a common question that pops up in every novice business owner’s mind. The answer lies in estimating the rent-revenue ratio. Choose a location by dividing a rough estimate of the monthly rent by the revenue.
DIFFERENT TYPES OF STARTUP COSTS
Every business has ongoing, essential, fixed, optional, and variable costs. It’s of utmost importance that every business knows the nitty-gritty of these costs during budget estimation. So, let’s view them in detail.
One-Time Startup Business Costs: These costs are only relevant during the early stages of the startup, such as expenses incurred for registration or licensing fees. It also includes the cost you pay for purchasing equipment.
Ongoing Costs: As its name implies, ongoing costs are re-occurring. These types of expenses include payroll expenses and utilities and seldom fluctuate. Moreover, these costs are highly predictable as well.
Essential Startup Costs: These costs are crucial for a business to sustain and grow. For instance, if you are aiming for an e-commerce store, an essential cost would include website development or marketing.
Optional business costs: Optional costs depend on you. Without them, you can still do pretty well in your business. For instance, it’s an optional cost if you wish to buy a van from Mercedes for your transport business. Optional costs rely solely on your budget. If you think you can make room for another office in a new building, it’s your call.
Fixed Costs: Fixed costs include rent, utility bills, and employees’ salaries that remain consistent month to month.
Variable Costs: Variable costs keep changing from month to month. For instance, if you own a retail store, the inventory can be variable.
Money To Cover Small Business Costs
After creating an estimate of how much money you would require to start your small business, the next step is figuring out where that money is going to come from. Do you have funds in a pocket, or do you require an investor? Are you going to try government funding? Credit cards?
Be extremely smart in figuring this part out because it has the power to affect the future of your small business. Private savings, loans from family friends, or government loans are good options for many potential funding sources.
When opening up a business, always feel free to contact a professional financial advisor for budget concerns. Do your best to explore funding options. Make sure your business is financially stable to handle the commitment if you work with a lender. Hopefully, this blog helps you to estimate your budget before you break the bankroll for initial business investment