Startup costs for a small business is one of the first factors entrepreneurs think about when considering opening a small business. Sure, you can start a small business with no money depending on the business, as there are many small businesses that don’t require startup costs, but he majority have lots of costs involved.
Whether its a home based business, a retail small business, a construction and remodeling business or any other type, business startup costs can in some cases deter you from pursuing a specific business, no matter how great of a small business idea that was.
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Several factors determine the cost of starting a business. These factors may include the type of business you want to start, the cost of doing business in that state, consultancy fees, employee salaries, costs of technology and the marketing budget.
Although, costs can range from a few thousand dollars to a quarter of a million dollars, the US Small Business Administration cautions about startup costs estimation, stating that a universal formula for calculating start-up costs would be impossible to attain.
Having said that, if you have a few great small business ideas you would like to pursuit but aren’t sure of the costs involved, here are a few things to help you get a rough estimate of how much it would cost you to start any given business.
1. Professional Expenses
As an entrepreneur, you will require the consultancy services of professionals from the onset of your business venture. It should come as no surprise that professionals charge hefty fees for their intellectual property. In areas where the Service Corps of Retired Executives (SCORE) exist in your area, take advantage of their free services can provide some basic startup business planning.
New businesses often require the services of an accountant to keep their books in order, and an attorney to create various legal documents. As of March 2011, the cost of these services ranged from an hourly fee of $100 to $300.
2. Legal Expenses
You will be required to get business licenses and tax certificates whose costs are determined by your local laws and range between a few dollars and hundreds of dollars.
Businesses that will require the client to come to you will also need insurance cover that may cost a few hundred dollars annually. A store will require you to pay deposits for utilities such as telephone, water and electricity, whose combined bill would range into a thousand dollars or higher.
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3. Start-up Equipment
During the startup period, most businesses will require you to invest in one form of equipment or other. Whether you run a food business, a retail store, bar, flower shop, or any other kind of business, you need equipments.
A small business may only require a computer workstation for approximately $1000, while a larger business will require these, as well as mobile phones, bar-code scanners, computers or point of sale systems which could cost more than $10,000.
4. Store Inventory
Inventory will be an essential expenditure for retail businesses. Stocking your retail store will set you back a couple of thousand dollars depending on which line of business you are in. You will have to invest in a good display and security gadgets.
5. Advertising and Marketing
Although often taken for granted, advertising and marketing budgets will easily take up 20% of your entire budget in order for your store to feel its impact.
It is recommended that owners set aside this percentage of their budget for marketing, as advertising has a way of quickly eating into all available resources. For businesses that have an on-line presence, capitalize on search engine optimization, social media for viral marketing and other low cost advertising options available.
6. Other Considerations
All startup businesses do not share similar start-up expenses. Those that will require to hire staff will incur other statutory deductions such as taxes, FICA, salaries and insurance. Funds need to be allocated to down payments and interest costs. If you opt to buy into an existing franchise, prepare to pay fees that according to” Entrepreneur Magazine” would range from $3000 to $150,000.
These are some of the main expenses that almost any kind of business has to deal with. The pointers above will help you avoid any surprises and have a better experience in starting and maintaining your small business, at least as far as costs are concerned, since they will give you a rough estimate of how much it would cost to start your own business.