No matter what kind of business you intend on owning, it is a good idea to estimate your business startup expenses prior to jumping in. Whether you plan on starting a small business or a larger franchise, you may be surprised at the total start-up cost. Nearly all new business owners underestimate the cost of starting their business, leaving it exposed to the risks of being underfunded. To help avoid this common mistake, use our free Business Start Up Costs Template to estimate how much money you need to get your start-up business up and running safely. See below for additional information, tips and resources.
AdvertisementCalculating business start up costs is critical to starting any business. An entrepreneur is usually required to put these costs together as part of a business plan, loan or grant application. They are also helpful when putting together proforma financial statements.
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AdvertisementThis Excel workbook will help you put together an estimate of costs and funding required to start your business. It is pre-populated with expense categories common to many small businesses and home-based businesses, so it can be very useful in helping you identify all of your start-up costs, including many you may not have considered.
Whether you start with the predefind categories or create your own list, begin the costing process by identifying all of the categories unique to your business. You may delete categories that do not apply. For a home business, many of the categories can be removed.
As you add your own costs or expense categories, the template will help you understand whether you have adequate funding. After you have your funding secured and you pull the trigger, use the worksheet to track your actual expenditures to help you keep your costs under control.
As you get your business going, you may want to consider using a more detailed business budget and other financial statements.
Starting a restaurant? This free template also includes a customized start up cost worksheet with many cost categories specific to owning and operating a restaurant. Perfect for helping you capture all of those Restaurant Start-Up Costs.
Starting a franchise, web business or home business? Continue reading below for some help with costs specific to these types of businesses as well as links to other helpful resources.
Starting a restaurant can be expensive because of the specialized equipment and facilities that are required. Luckily, there are usually leasing options available for the expensive items and many landlords will work with you on leasehold improvements. Use the Restaurant specific worksheet in the Business Start up Cost Template to help you consider other expenses such as cleaning costs, uniforms, menu development and supplier sourcing costs.
The nice thing about a home-based business is that you can forgo many of the typical expenses of a startup. Things like internet, office space, furniture and utilities are already taken care of. Better yet, if you qualify for the home office deduction, you can write some of these items off as business expenses. Simply put $0 in the template or delete the rows for those expenses already covered. If you are starting a home-based internet business, continue on to the next section.
A web based business may be one of the least expensive businesses to start, especially if you can do the web development work yourself. Use the basic template and decide which expenses apply to you – and delete the rest. You may also want to consider some items not listed, such as custom web page design and development work, custom database development and scripting, search engine optimization (SEO), or advanced hosting services. Also, if your business is retail, don't forget to include all of the referral and usage fees for selling through storefronts like Amazon and Ebay.
Our Business Start Up Cost Template will also help you if you are looking for a start-up franchise opportunity or looking for franchises for sale. Along with all of the regular costs of starting a business, the template also includes categories for fixed franchise fees as well as monthly franchise dues and marketing co-op fees. You may also want to check with the franchise corporate offices. Many of them provide tools to help you estimate your start up and operating costs.
The key to putting together accurate numbers is to get into the details. This requires doing detailed research by calling suppliers and providers, searching the internet and listing any and all costs that may be applicable. Start out with a solid list of cost categories and then research these expenses to get good estimates.
The business cost template comes pre-populated with many of the most common expense categories. It also contains additional suggestions and tips for each category to help you make sure you considered everything. Feel free to add additional line items that are unique to your business.
Start by listing the sources of funding available to you in the Estimated column. This would include money supplied by owners and investors, funds available from bank loans or other lines of credit. In some cases you may be pursuing other sources of funds such as grants, endowments or sale of assets.
After all your funding sources have been outlined, start putting in the estimated fixed costs. The fixed costs are one-time costs such as purchasing tools and equipment, initial inventory, registration and license fees, software purchases, or website creation.
Two key parts to the fixed costs are the Working Capital and a Reserve for Contingencies – these can be significant. Any startup is advised to have a Contingency Fund as there are always last minute surprise costs and fees. Consider the risks of your business and set aside sufficient funds accordingly.
Be sure to include enough Working Capital to fund your normal business operations as you grow. It helps ensure that you have adequate cash flow. Remember that there can be a significant amount of time between when a sale is made and when you actually receive payment. Sufficient working capital is needed to allow you to continue to purchase inventory and pay bills while waiting for payment. More than one growing business has failed because it lacked sufficient working capital.
Businesses are seldom profitable the first day. To have a clear picture of actual cash required, estimate your monthly operating costs as well as how many months it will take you to move from the red to the black. The template is set up to assist you in determining these important costs. Estimate how many months you believe it will take to get up and running and fill in the estimated monthly costs.
After the time window is provided and all the sources and costs are identified, the spreadsheet will calculate whether you have a surplus or deficit in funding. If you have a deficit, then you will need to figure out if there are ways to scale back your costs or look for additional funding. If you have surplus and are confident in your numbers, you may be good to go.
The excitement of starting the business can cause entrepreneurs to spend more than they planned. Use the template to keep you grounded. As you collect funds and begin to spend money, record the Actual amounts next to the Estimated numbers. The spreadsheet will calculate whether you are running over or under you estimated budget so you can make adjustments as you go.
Make sure in your calculations you have sufficient funds for Working Capital and a Reserve Fund. Consider these like insurance for your start up business. Without them, you will not be able to grow your company or be able to withstand unexpected expenses.
Working Capital is what you will use to actually grow your business. It allows you to purchase larger volumes of inventory in preparation for higher sales. Lacking sufficient Working Capital can really kill your growth potential.
Your Reserve Fund is a safety mechanism like a car airbag – it protects you from unforeseen situations. Without it, one large unexpected cost can set your entire business into a tailspin, forcing you to choose between paying payroll, suppliers, utilities, or other operating costs. While you may survive, you will certainly miss out on opportunities to grow your business.
Disclaimer: This spreadsheet and the information on this page is for illustrative and educational purposes only. We do not guarantee the results or the applicability to your unique situation or business plan. You should seek the advice of qualified professionals.