Most newbie entrepreneurs commit this folly: They think starting a business is all about passion, determination, and grit.
But, as those with experience might tell, it takes money to make money. Especially if you’re just starting, there are costs you cannot simply ignore, since you’ll have to pay them BEFORE your business starts generating any income.
And know what the worst part about startup costs is?
They add up — quickly. That means if you aren’t careful enough, startup costs might end up jeopardizing the existence of your business. In this post, we’re giving you a gentle reminder about the six business startup costs you cannot ignore.
Potential outlay: $500 – $15000
Research costs come into play before you put your business idea into practice. They go into exploring the makeup of the industry, the profile of your customers and the size of the market. These costs are necessary as they let you know whether or not there’s a consumer-base for your products.
To carry out market research, you’ve two options to choose from – the first of which is hiring the services of a market research firm. Or, if you don’t have enough money early on, you can rely on email surveys or phone to carry out the research yourself.
Potential outlay: $10,000 – $125,000
Whether you intend to run a service or create a product, the tools you’d need to do either are obvious. What isn’t so obvious, unfortunately, are the purchasing costs. That’s because equipment costs vary depending on the type of business you intend to run.
For instance, if you want to start a freelance writing company, you’ll need a reliable internet connection and computers, entities which require relatively low investment. Conversely, if you intend to open a restaurant, you’ll have to spend a large amount on stoves, sitting chairs, and other kitchen equipment.
Potential outlay: Variable
In contrast to above-mentioned costs, the licenses and permits you need to start your business aren’t one-time expenses. Since these permits have to be renewed at constant time intervals, make sure you factor in these expenses and set the money aside.
Similarly, to build a name for your business, you might need to link up with your local professional/industry groups and chamber of commerce. These networking organizations have annual membership fees which can run to the tune of hundreds of dollars a year.
Potential outlay: Variable
Provided you’re building a product, it would require an investment of hundreds (if not thousands) of dollars to put together a competent team, an actionable design of the product you want to build and costs of designing and manufacturing your product.
But what if you are involved in an e-commerce or service industry? Then, money will have to be spent on areas like honing your skills, churning out content, networking, setting up a website and managing its cybersecurity.
Potential outlay: $500-$1000
When starting a new business, you’ve two choices: either to turn it into an LLC (limited liability Company) or a C Corp (traditional corporation). While LLCs protect you from personal liability, most entrepreneurs prefer C corps since they make it easy to raise capital.
Regardless of which entity you decide to choose, the incorporation of your business needs lawyers, which will cost money. In fact, as experts tell us, it will take somewhere between $500 and $1000 if you need the help of a lawyer to incorporate your business.
Potential outlay: Depends on the number of employees
Regardless of whether you’re going to rent your office space or buy the whole building, renting an office space will eat up a major chunk of your fixed costs. Experts recommend that you should put aside somewhere between $100 and $1000 per employee per month for office space costs.
Fortunately, unlike other costs mentioned in this article, you can mitigate these costs. All you have to do, especially if you’re only starting, is to either work from home or look into spaces which give the option of co-working to minimize the costs.
Regardless of the type of business you run or intend to run, you’ll encounter both the one-time costs as well as the recurring costs. While equipment and incorporation fees are one-time costs, product development and office development costs generally tend to be recurring on a monthly or annual basis.
Consider getting a small business loan to fund these costs and the many more you’ll inevitably face. There are many financing options for businesses, so do your research to find the best option for you.
Don’t take lightly either of these costs as, if ignored, their piling up might threaten the sustainability of your business.