What business start-up costs should I expect when starting out?

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A great idea can only become reality if you have the resources to make it happen, and sadly one of the things we see a lot of is new business owners underestimating the cost of setting up a company. To have the best chance of success, it’s important to start with a clear idea of all business start-up costs.

What are business start-up costs?

Business start-up costs can be defined fairly simply as the expenses that are incurred during the process of setting up a company. These costs can be loosely grouped into two key types of business set-up costs:

Investigatory costs:

This covers the cost of your initial research, accounting for things like competitor analysis, consultancy fees, market research, and expenses incurred when doing deals with potential distributors or suppliers.

Pre-launch costs:

This covers the costs that are incurred after you have made the decision to launch your business, but before the business is actually open. Generally, things like advertising, office furnishings, damage deposits, and so on are all considered to be pre-launch costs.

Business start-up costs will vary depending on whether you’re completely starting from scratch, taking over an existing business, buying a franchise, or have specific industry related costs. For example, for start-ups, cash flow is all-important, so having a solid understanding of start-up costs is a crucial part of getting your business off the ground during the first 6-12 months.

5 Factors to consider when it comes to business start-up costs

1. Research, research, research

Yes, we know this sounds a bit boring but the time you spend doing your research now to establish how much money you need to begin your business, the more likely it is that your business will succeed.

Put together a business plan and once it’s done, consider talking it through with a qualified accountant or financial adviser who can review and sense-check your business start-up costs (and other important factors).

If you are struggling to put your ideas down into a plan, consider attending a workshop on developing a business plan. A great way to do this is to search for events online as these can provide useful hints, tips, and tools.

Also, don’t forget to talk to people who are running similar ventures about what costs you might expect. Industry associations can also be a good source of information, as are online forums where people may already be sharing relevant information that you can use.

2. Factor in potential business start-up costs

Every business idea will have different set-up requirements, but some of the most common business start-up costs you are likely to incur include:

Category Potential Costs
Registrations and professional Business registration
Domain name registration
Accountant’s fees
Solicitor’s fees
Profession registrations and fees
Licences and permits
Food handling certificates/Serving of alcohol
Financial Business insurance such as public liability, income protection, vehicles, stock, workers’ compensation etc.
Bank accounts
Working capital
Banking packages, such as overdraft facilities
Business loans and overdrafts
Premises Rent/lease agreement
Fit out/modifications
Setting up Office equipment & furniture
Shop front equipment – cash registers etc
Stationery and office supplies
Utilities such as water, electricity, and phone lines
Other plant and specialist equipment
Technology Computers, printers, scanners, and IT servicing
Internet, mobiles etc
Marketing Website
Letterhead, brochures, and business cards
Printed material, online directories etc
Staff Salaries
Health & Safety – first aid kits, alarms etc
Uniforms, safety clothing
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3. Effectively manage your expenses

Thriday is a cost-effective new choice for accounting software. With a free tier and an affordable premium plan price of only $29.95 per month, businesses can access powerful financial tools without breaking the bank.

It might be good idea when looking at your business start-up costs to split them between ongoing and one-off costs. It can also help if you overestimate costs, so there are no major surprises later in the year. One-off costs should include everything necessary to get the business ready for trading on day one. 

For managing ongoing costs, you should develop a cash flow forecast/budget. This will give you a sense of when money is both flowing in and out of your business over the first 12 months of trading.

4. Identify your break-even point

Break-even is the point at which you cover all of your costs. What you need to understand is how your costs behave in relation to your sales. Some of your costs will increase as your sales increase. These are your variable costs. Other costs will remain constant over a range of sales. These are your fixed costs.

Once you know your break-even point, you can more accurately plan how many sales you need to achieve in order to start making a profit, and these figures will be a real help when you are planning your business set up costs. It’s important here to be super realistic in your cash flow planning and make sure you allow some space in your calculations for unforeseen expenses.

business start-up costs 2

5. Ask the question - can you afford to do this?

While many businesses succeed many fail, so having got this far and being aware of all your business start-up costs, now is the time to ask yourself is it time to hit ‘go’ or say ‘no’.

In making this decision you should also consider your options available to finance your business. Are you going to be self-funded or will you need to borrow money to launch, buy stock, purchase vehicles and equipment, or cover fit-out costs?

A business overdraft could help with financing initial set-up costs and trading through the period it takes to achieve break-even. You might also consider a business loan or unsecured business loan. There are many options available depending on your circumstance and talking these through with an experienced, qualified accountant can make all the difference.

How to Start Your Business The POP Way!

While setting up a new venture is really exciting it’s important that you are aware of all the key business start-up costs that you are likely to face. This can be challenging and time consuming, but the team at POP Business are ready to lend a hand. Our qualified experts can help you plan and manage your business at every stage of growth. Call us to find out more today!

If you’re looking to hit the ground running with your new business, check out our guide designed to help business owners start their business the right way! Sign up to our mailing list below and download it for FREE!

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Picture of Sidney Cachuela

Sidney Cachuela

I am a business mentor, an associate financial advisor and one of the co-founders at POP that genuinely revels in solving complex problems that businesses face. I’ve worked with high profile wealth managers, financial advisors and business owners to drive innovation and achieve success. My expertise includes helping small businesses with a range of accounting services, including: financial advice, accounting and bookkeeping, GST tax planning, as well as company, trust and partnership tax returns and more.

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