Having the chance to start your own small business is exciting – you get to choose a product or service idea you’re passionate about, pour your time and energy into it and watch it develop.
Being a new startup founder is more challenging financially than many people realise.
Conventional wisdom says that in the beginning, starting a new business is relatively cheap. After all, you’ve only got one basic product or service, and not much of a workforce to speak of (at least yet). In reality, though, there are a great many hidden costs you have to be aware of. Being a startup founder is more financially challenging than many people realise.
If you’re considering starting your own business soon, you need some tangible information to work with. What goes into a budget? What are all the costs you need to be aware of – including both the obvious ones and a few that might be a bit counterintuitive? Here’s a rundown of everything.
Determining all the costs in your budget
If you’re considering starting a small business, you have to first put in the legwork to figure out all the costs involved – not just the obvious ones like renting an office building and hiring a few employees. According to Business Queensland, being able to identify business startup costs in Australia means running through a detailed to-do list. You have to design a detailed business plan, estimate the startup costs and then measure the running expenses you accumulate as you go.
Drawing up a business plan is a complicated process. You may want to begin by doing some market research. Look at the steps that other companies in your industry had to take to get off the ground. Which of those steps will you need to replicate, and which ones can you improve on and save a few dollars? Examine their financial statements in detail, if possible, and find ways you can stretch a dollar farther than they did.
Once you’ve collected all the background info, you can begin to calculate your costs – including both one-time expenses like registration fees and ongoing ones, like the capital you’re investing in product development and marketing. As your business begins to operate, keep a close eye on results and see how your initially estimated costs deviate from reality.
Are you leaving anything out?
When you’re in the beginning of the business banking process and listing literally everything that costs you money, being comprehensive can be difficult. You’re only human, and it’s easy to forget an item or two. The Department of Industry, Innovation and Science cautions that a lot of things fall under the umbrella of “capital costs,” and it’s important not to leave anything out. For example, are you considering:
- Initial research: Poking around online for a few budget spreadsheets might not seem like an expensive project, but it can be if you’re not careful. You might need to pay for the rights to certain proprietary data that’s not yours, or compensate an outside consultant who helps you get them. There’s also the opportunity cost of doing this research when you could spend your time doing something else productive.
- Registration fees: Getting your business officially on the books and licenced requires a lot of sign-ups and fees of various kinds. You may need intellectual property rights to your product, a domain name for your website, title and registration for any company vehicles, membership fees for industry associations and more.
- Business infrastructure: Running a productive organisation requires a lot more than just putting people in an office. In addition to a facility, you’ll also need utilities like power and water, phone and internet connections, computers and other electronics.
If you’ve never founded your own small business before, you might overlook an entire category from the above list of expenses. One can hardly blame you; starting a company from scratch is overwhelming. With a little help, though, you can survive the ordeal. This might come in the form of financial advice; it may also mean getting some extra cash to help with some startup costs.
Get help with financing equipment purchases
As you go about the business finance process, you may discover you have certain needs that you just don’t have the cash for just yet. This can present an initial paradox: You can’t make your product without an expensive piece of equipment, but you can’t pay for that equipment without selling your product.
The solution is to get help purchasing the equipment. At Bank of Queensland, we offer equipment finance solutions that just might work for you. If you’re looking to invest in new materials for your medical, dental or veterinary practice, we have a team of finance experts at BOQ who are eager to help you out. Get in touch with one of our specialists today.