Here’s How Much These 6 Startup Expenses Will Really Cost You

Many of the expenses that you’ll encounter along the way are non-negotiable – like the price of going incorporated or the regular yearly cost of taxes. However, if you do your research before you launch your company, you could save yourself some serious cash.

For instance, you could reduce the amount you need to apply for with your startup business loan by managing your own taxes on QuickBooks instead of paying for an accountant. Alternatively, if you don’t need a physical location from which to sell your products, you can cut costs by working from home or using a coworking space.

There are also costs that you probably shouldn’t skimp on too – like equipment and supplies. To help you prepare for the costly process of beginning your business, here’s your insight into how much some common startup expenses will actually set you back.

1. Business Equipment: Variable

Most companies will need to finance equipment immediately to get up and running. Depending on your business, the cost of equipment can range from $10,000 to $125,000. If you’re thinking you can skip this expense just because you’re running an online business from home, then think again.

When you’re running an online business, you need a good internet connection with a reliable router, a fast-performing computer, a desk, and space to work in and other crucial essentials. If you’re launching a more comprehensive business, like a restaurant or store, then you’re going to need physical real estate, point of sale systems, storage space and more. The costs associated with equipment can vary drastically depending on the type of business you run and your chosen industry.

2. Legal & Licensing Fees: Up to $750

One of the first things you’ll need to do when you establish your business is to choose an entity. In other words, do you want to be a sole trader, a partnership or a limited liability company? If you decide to go incorporated, then there’s a price tag involved. Although there is a small fee, to begin with, you benefit from better potential tax strategies in the future too.

Even if you aren’t going to go incorporated, there are some additional licensing fees that you may need to think about when you launch your business. Some companies in the service, aviation, and agriculture industries require professional licenses. Find out if there are any requirements for your profession by speaking to your local government, or an accountant.

3. Marketing & Promotion: 10% Of Your Budget

All businesses need customers. If you want to earn as many customers as possible for your brand, then you need a way of advertising your company. The good thing about marketing is that you can adjust your campaign to suit your budget as you go. For instance, you might start with some basic online marketing and content production to help you raise awareness for your business.

Over time, you might expand to invest in things like influencer marketing, social media advertising, and pay-per-click advertising. If you’re really lucky, you may be able to get your hands on some free promotion too. For instance, word of mouth marketing is some of the most valuable advertising anyone can get – and all you need to do to generate word of mouth is creating a product or service that gets people talking. In today’s social-media-driven world, that’s easier than you might think.

4. Inventory: Up To 25% Of Your Budget

If your company provides a service or dropships products, then you don’t need to worry about inventory costs. On the other hand, if you’re dealing with a standard product, then you’ll need to spend some of your initial cash loan on inventory. At first, it can be difficult to decide how much stock you need to carry. You don’t want to load up on too much, because you could end up with products that you can’t sell.

However, if you don’t have enough inventory set aside, then you risk upsetting customers who come to buy from you, only to discover that your items are out of stock. Most experts recommend committing between 17 and 25% of your budget towards inventory. It’s particularly important to have plenty of inventory in the beginning, when you’re building a reputation with your customers.

5. Payroll: Up To 50% Of Your Budget

Even if you’re just starting and you don’t have a lot of money to spare, you still need to find the cash to regularly pay your staff – and yourself. Remember, your payroll will include not just the cash you spend on wages for your employees, but also other expenses like bonuses, commissions, overtime pay, and stipends. As your company grows, there’s a good chance that you’ll need to spend more money on payroll over time.

The amount you spend on wages can vary depending on the kind of business you’re running. Consider looking into the average payroll for the kind of employees you want to hire in your area. Don’t be too stingy here, or you could risk missing out on the talent that will help to grow your business.

6. Business Insurance: Around $1,200 Per Year

Finally, remember that it’s always essential to make sure that you’re properly protecting your business. Just as you defend your family and your home with insurance, you need to do the same for your company too. Business insurance gives you protection against angry customers that may decide to sue you, as well as keeping you defended when it comes to things like employee claims.

Most small companies spend up to $1,200 per year on insurance. The amount you pay in total will depend on your insurance provider, any risk factors that are associated with your business, and the kind of coverage you decide to take out.

There you have it! 6 startup costs to prepare for! Now go and work on your business budget.

 

 

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