Startup

Posted 04 Apr 2020, Editor's Desk

9 Common Startup Expenses – The Checklist



Common Startup Expenses: The Must-Read Guide


You’re almost ready to start your new business venture. Congratulations!


You have thought of a great business idea that you know your customers are going to love.


But the path ahead of you won’t be easy. The key to a successful business is preparation. 


Un-accounted or sudden Startup expenses are the most common reason why startups fail. Before you open the doors of your business, you’ll have bills to pay.


Understanding startup business expenses will help you launch and grow your business successfully.


Calculating startup expenses helps you:

  • Evaluate the break-even point of your business
  • Estimating revenue or profits 
  • Securing loans
  • Attracting investments in your business
  • Save money


Startup expenses vary from business to business, but there are 9 common expenses that you should consider when preparing your startup.



1. Registration & licensing fees: 


When you start your business, you will have to register your business as per the rules & regulations of the government. 

Depending on your industry, you might have to incur expenses on additional licenses as well.



2. Rent:


You might not have to worry about the rent, if:

  • You’re starting out as an individual, or
  • You plan on letting your employees work from home


But, if you need an office space or space for a shop, it’s going to cost you.

Rent is one of the key factors in the success of a business, as:

  • It’s one of the main operating costs in a business
  • It’s a fixed cost 



3. Utilities:


In addition to the fixed cost of the rent, you’ll be responsible for paying additional expenses of your office space like: Electricity bill, Water bill, Gas, Internet & phone bills.



4. Employee Salaries:


You need to pay your employees, even at the initial days of your business when you’re not bringing in much revenue.


Employee salaries will probably be one of your most costly startup expenses for years to come.


Payroll includes:

  • Wages of your employees
  • Additional benefits: bonuses, commission, overtime pay.



5. Office furniture, equipment’s & supplies:


Office and supplies add up fast.

  • Even if you’re working from home, you might need desks, chairs, computers, phones, filing cabinets, printers, ink, pens, and papers.
  • If you’re operating in a traditional 9-5 office environment, you might need a microwave, water cooler, etc. apart from the desks, chairs, computers, and phones. 



6. Inventory:


If you’re in retail, wholesale, manufacturing or distribution, you will have to maintain inventory to sell.

Knowing exact inventory requirement is tricky:

  • Excess inventory: carries a risk of spoilage or damage and keeps your capital blocked
  • Less inventory: carries a risk of losing customers


Hence, you should calculate your minimum inventory requirement by analysing the trends of your industry.



7. Marketing:


Marketing and promoting a new startup is almost a non-stop task.


Marketing material might include Banners, Business cards, Brochures


Digital marketing increasingly forms the basis of many startup's efforts to attract and retain customers.


Also, it’s almost unheard of a business today that doesn’t have its website; so whether you design your own website or pay an agency to design one for you, you’ll need to factor in the time and money to develop an online presence.



8.Technology:


In addition, there is a growing list of other technology expenses you should be aware of when preparing your startup:


  • Software licenses
  • IT support
  • Data storage
  • Email accounts
  • Payment gateways
  • Any third-party integrations or services



9. Taxes:


While planning your budget, you’ll have to assign a specific amount or a percentage of your budget to allocate towards taxes.


The amount you pay depends on your revenue, deductible expenses and your business entity.


You should work with a professional Chartered Accountant (CA) to manage your business taxes, which is money in and of itself in the list of your startup expenses.


Don’t forget to budget your expenses:


When calculating your business startup expenses, a good rule of thumb is to be able to cover at least 6 months’ worth of expenses up front.


When you’re getting ready to launch your new startup, it is very easy to get carried away thinking about the glamorous things, like the products that you’re going to make, or the innovative marketing campaigns that you’ll run.


However, unless you can make sure that your business is profitable, you won’t be able to keep the lights on for very long.


We know, planning and estimating your startup expenses is one of the most stressful parts of launching a new startup.

But being realistic about estimating your startup business expenses will go a long way towards getting your company up and running.


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