Many entrepreneurs don’t realize the costs involved in starting a business. You’ll have to buy furniture and equipment, pay for office and warehouse space, just to name a few. Some don’t even have a financial plan in place, relying instead on a steady influx of customers to keep the business running.
It doesn’t matter what industry you’re in. For example, a lawn care startup’s costs can be comparable to those in the food or logistics business. Running a business without accounting for one-time and recurring costs is not sustainable. You risk losing your investment and your business altogether. Here are some of the most common expenses that you need to consider when starting a business:
1. Commercial space
Every company needs office space and depending on your business, retail, and storage space. Whether you’re renting or buying, the costs will be considerable. That’s why many startups operate out of homes or garages in the beginning. If you can’t afford to lease or buy space, it might be your only option.
A lease is cheaper than buying, but you’ll have to commit to a long-term contract. You also have to consider other one-time and recurring costs, such as utilities, rent, and security deposit. It will take you a few months from negotiating the contract, designing the interiors, buying and setting up furniture and equipment, to opening your business.
If you can, consider a coworking space instead. They don’t have lock-in periods or security deposits. You only need to pay for the time and space you consume. They also come with amenities and equipment such as a fast Internet connection, conference rooms, and pantries.
Practically every business will need to invest in equipment to start earning money. For example, if you’re a courier service, you’ll need delivery vans and motorcycles. Part of lawn care startup costs also include lawnmowers and other lawn care equipment. The expenses differ from industry to industry. When buying equipment, consider buying secondhand rather than brand-new.
Not all companies need this, but if you’re in manufacturing, retail, wholesale, or food service, you’ll need inventory to get your company up and running. Inventory management can pose a headache for beginners, however.
With little data to work with, knowing how much to order is part trial and error, part courage. If you end up with too much, you risk getting stuck with damaged or low-selling items. Too little and you risk incurring customer dissatisfaction.
You can’t earn money if no one hires or buys from you. Word of mouth is nice, but you need to invest in marketing to get the word out about your products and services. Some of the most common methods include business cards, brochures, banners, media buys, and online ads. A low-cost way to increase your profile is to use social media such as Facebook and Instagram.
You’ll need to pay your employees even if your startup isn’t generating profits yet. If you’re truly desperate, you can sacrifice your share, but that’s not advisable. Typical employee costs include training, bonuses, and other statutory pay and benefits.
Overall, remember that there’s more to a startup than a business concept, some office space, and a few employees. Hopefully, this guide will make your entrepreneurial journey easier.