You have an excellent idea for a new business and want to make it happen. But before you take the plunge, you should know how much money you’ll need to start.
If you know your business costs ahead of time, you can plan and avoid problems with cash flow. Some small business owners and entrepreneurs start up quickly and ignore this step, which can cause the business to fail. According to statistics, 38% of new companies fail because they run out of money.
You have to do things right if you want to start your own business online. But how much does it cost to get started?
how much does it cost to start a business?
Think of startup costs as the money you need to get your business up and running before it starts making money. Some of these costs will only happen once, like the fees for forming a business or hiring a logo designer. Other costs, such as insurance, inventory, salaries, or bookkeeping, will always be there.
Your startup costs will depend on the type of business, how it is set up, and the industry. For example, the costs of running a storefront business will differ from those of an online business that doesn’t need office space or utilities.
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how much do we have to say?
You don’t want to risk not having enough money after you start. Knowing how much money you need upfront will help you decide if you need to get loans and grants, apply for a line of credit, or find investors.
Recent research shows that you can start an accounting, online retail, construction, or landscaping business with less than $5,000. Most restaurants, medical offices, and manufacturers, which are some of the most expensive small businesses and startups to start up, need more than $100,000.
A detailed business plan is one of the best ways to determine the real numbers. Be honest about how much you’ll spend and how much money you’ll make in the next three to five years. Then, be honest about how long it will take to start making money.
The Small Business Administration (SBA) has a startup costs worksheet that can help you figure out how much it will cost to start your business. When you use this template, put in at least six months’ worth of costs, not just the first month’s, so you can get a complete picture of your finances.
choices for getting money for your new business
If you’re on a tight budget and need more money, there are many ways to get it. People who want to start a new business can look for investors or get small business loans from banks or the SBA. Crowdfunding sites like Indiegogo make it easy for business owners to raise money quickly and get support for their new products or services.
If you need help finding lenders or ways to finance your business, the Countick team has put together a list of resources to get you started:
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standard costs for starting a business
The guidelines for standard costs for starting a business are
1. fees for registration and forming a business
Most businesses don’t need to register with the federal government to become legal unless they want a federal tax ID. Less than $300 will be needed to register your business name.
Choosing a business structure is essential because it can affect finances, the law, and taxes.
You can run your business as a sole proprietorship, a partnership, an LLC, a C corporation, or an S corporation. The cost of registration will depend on the type of business you choose. The fees also change based on the state where your business is based.
If you want to run your business as a sole proprietorship or a general partnership, you must register it under your name. This is the cheapest way to run a business. Filing with the Secretary of State will cost about $25.
If you do business under a name other than your own, you must file a DBA. It costs between $10 and $110, depending on where you do business, or you can register as a different kind of business, like an LLC, for a different fee.
In Kentucky, the fee for forming an LLC can be as low as $40 or as high as $500. (in Massachusetts). The cost to incorporate varies from state to state, but it’s in the same range as an LLC.
read more: the 14 must-have startup tools
2. licenses and permits
You have to research and ensure you’re following the law. Depending on where your business is and what it does, you may need different types of licenses and permits.
Some licenses and permits you might need for a new business are:
- Professional License:To work in medicine, law, accounting, engineering, and many other fields, you need a professional license. The cost of a professional license varies by field, and you’ll probably have to renew it every year.
- Permits For Businesses: Permits For Businesses include a health permit for $25, a building permit for $1,156, a fire inspection for $100, and a sales tax permit for $0 to $100. All of these costs are about the same.
3. website
Your business website is like a storefront that is open 24 hours a day, 7 days a week. It should have information about your products, services, hours, and how to reach you. A robust online presence can bring in a lot of money, so it’s essential that your site looks like a pro made it.
Not only will you have to pay for the design, but you will also have to pay for hosting and your domain name, which is usually billed once a year.
You can build a website in a few different ways:
- Hire A Professional Web Designer: This is the most expensive option, starting at around $5,000. But it takes care of the trouble for you, which is excellent if you don’t know much about technology.
- Use WordPress: WordPress is a free, open-source platform, but hosting, themes, and plugins cost money.
- Use a Website Builder: Website builders like Wix and Squarespace make it easy, fun, and inexpensive to make a website. Expect to pay at least $12 to $13 per month to build a website without ads.
4. space for business
Unless you are a digital nomad or work from home, your office, retail, or factory space will likely be your most considerable cost. Space costs are also the most variable because they depend on how much space you need.
Remember that when you lease a commercial space, you may have to pay for utilities, building maintenance, taxes, furniture, equipment, renovations, and more. You may also have to sign a long-term lease when you buy commercial property.
On average, renting office space costs about $34 per square foot, but this number increases in cities where startups are popular. In New York, it costs $84 per square foot, while in Denver, it costs $26.83 per square foot.
If you can’t afford to pay high rent for an office, you might want to think about a coworking space instead. There are coworking spaces all over the country. Many of them come with kitchens, meeting rooms, Internet, and furniture.
Coworking spaces let entrepreneurs, freelancers, and creative professionals work in the same space for a fraction of the cost of traditional office space. These shared office spaces are getting increasingly popular because they are a cheap way to share ideas, work together on projects, and meet other people in your field.
There are many different kinds of memberships and benefits to choose from.
You can also use apps like Asana and Slack to work together on projects and communicate. These platforms make it much cheaper for team members to work together from a different place.
5. equipment
Equipment is usually one of the most expensive parts of a new business. It usually costs between $10,000 and $125,000.
If you want to start a landscaping business, you’ll need to buy hand tools, a truck, and a trailer to move everything around. Or, if you want to open a pizza place, you’ll need ovens, dishes, and fridges.
Equipment costs depend on industry and business type, just like other costs. Here are some other rough estimates of startup costs by business:
- Entertainment and the arts: $16,000
- Property rentals and sales: $75,000
- Restaurants and hotels: $125,000
If you’re worried that you won’t be able to afford essential equipment, you should start by applying for loans, leases, or lines of credit to pay for it.
6. marketing and advertising
There are many ways to spread the word. Business cards, direct mail, billboards, TV, and radio ads are all forms of traditional advertising. You could also use Google Ads to run online advertising campaigns or add extra production costs for graphic design, photography, or videos. Startups spend an average of 11.2% of their total income on marketing.
You can use Facebook, Instagram, and LinkedIn to promote your new business for free until it gets attention and makes sales.
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7. payroll
Even if your business isn’t making money, you’ll have to pay your employees if you hire them. You’ll have to take into account benefits, bonuses, commissions, overtime pay, and paid time off. According to the Bureau of Labor Statistics, benefits make up an average of 31.8% of the cost of an employee.
Payroll costs will be different for each new business. A worker will cost between 1.25 and 1.4 times their salary. Take the case of a worker who makes $40,000 a year. After payroll taxes and insurance, that will end up costing you $54,000. You should also set aside some money for yourself.
Payroll software helps you plan out your costs, which makes it easier to do payroll.
8. business insurance
Business insurance guards you against events that could cost you a lot of money or drive you out of business, such as accidents, natural disasters, and litigation.
You’ll need to talk to multiple insurance companies to get the best price. Before deciding on the best insurance for your business, looking into all your options is best.
You should consider things like industry standards, the size of your business, the number of employees you have, and other risk factors. For example, a sole proprietor who runs an online store will need less insurance than a restaurant with many employees.
Here is a list of some of the business insurance options you might want to look into:
- General liability insurance costs between $400 and $800 per year.
- Commercial property insurance costs between $300 and $2,500 per year.
- Workers’ compensation costs between $0.75 and $2.74 per $100 spent on wages.
- Errors and omissions insurance costs between $2,000 and $5,000 per year.
9. office supplies
Remember that office supplies can take up much of your budget. Employees will require desks, chairs, and computers if they have office space. The expense of office furniture, appliances, small office supplies (such as paper, staplers, and pens), and computer software adds up.
10. bookkeeping
If you haven’t started making money yet, you probably haven’t thought much about your books, but you should. Bookkeeping takes a lot of time and attention to detail. When you’re busy trying to get your business off the ground, it can be easy to forget about your finances.
Having someone do your books like countick can take one more thing off your plate that is hard to do. When it’s time to do your taxes, your bookkeeper can help you find deductions to save you money.
you may also like to read: how to choose the right bookkeeping software for your business
make sure the math works from the beginning.
Costs are involved in starting and running a business that can last. But if you do a little market research, you can determine how much it will cost to get your business off the ground. Then you’ll be well on your way to running a successful business.
