Initiating a business is exciting, fun even. But startup dreamers shouldn’t forget the business of starting a business. Sure, it’s enjoyable to pick out a cool logo, a mission statement, a team of professionals to back your vision and a sweet office rental. But don’t let the looming, obligatory startup expenses involved in getting your startup off the ground get lost in the excitement.
If you do, your success will falter. Estimating an accurate startup cost is essential to meeting your future goals. Make sure you get your funds in order for the following expenses.
Top 5 Unavoidable Startup Expenses
1. Professional Costs
Whether you’re setting up an LLC, a corporation or otherwise, you’re going to have to pay a fee just to move past the phase of conceptualizing your startup by making it into a real, registered business. States differ on costs and registration procedures, but this is often the first check you’re going to stroke as you get your business off the ground.
Your professional costs will expand and skyrocket from there: You’re going to need to shell out expenses for copyrights and patents. And, you’re definitely going to need an accountant and a lawyer at some point, and we all know how affordable those services are.
2. Technology
Another one of the initial startup expenses not to discount as you financially plan for your startup is the cost of designing, developing and hosting a website. A lot of people naively think that they can accomplish most of these technological feats themselves, and they can dream on. Designing, developing (and most importantly) efficiently hosting an e-commerce site to house your startup is no easy task.
Unless you have a fully-functioning, professional IT staff on board when you initiate your startup (which I’m guessing you don’t), you’re going to have to look into a qualified hosting company that can provide your site with the resources it needs to successfully get off the ground. This will likely include talk of servers, hardware, software, Web security, maintenance and further IT consulting.
And, don’t forget other tech costs like high-speed Internet access, printers, payroll software, cell phones and beepers. Okay, just kidding about that last one.
3. Marketing
It’s likely that you’re not going to forget about the fact that you’re going to be shelling out some money for advertising and promotion to effectively get your new business off the ground. But hear me out. There’s a chance you might not be factoring in quite enough funds in this department.
Sure, you know you’re going to want to place ads locally and nationally (who knows, maybe globally), and you’re probably going to be looking into paying for online advertising and SEO costs. However, common marketing expenses are often forgotten, like the fact that you’re going to be printing stationery, posters and other marketing materials. And don’t forget the cost of admittance to trade shows and industry events to get your name out there (as well as chamber of commerce membership fees and the expenses involved in joining industry associations).
Public relations isn’t cheap, but investing in PR can take your business far, fast.
4. Administrative Costs
Little things add up, so take everything into account when budgeting for your startup expenses — right down to the purchase of paper clips and staples. Never mind the bigger expenses like desks, office chairs, filing cabinets, etc. Also, remember that administrative costs go far beyond office supplies to include licenses and permits, parking, utilities, rent and more.
Plus, if you want to really look professional, you’re going to need to invest in the proper packaging materials for your business (and don’t forget shipping and postage), which brings us to the next startup cost factor not to be forgotten.
5. Cost of Sales
It seems counterproductive to think of your startup’s first few sales as costing your business money; but that’s how it is when you’re just starting out. Raw materials are going to factor into the cost of your sales, and you’re going to have to beef up your product inventory in order to actually even make those sales.
If your startup is going big, then you’ll have to factor in warehousing and shipping insurance as well.
Don’t Freak Out
Take a deep breath and stop biting your nails. Now roll your shoulders a little and relax.
The above mentioned startup expenses shouldn’t freak you out and discourage you from accomplishing your startup dreams. But you should take note of them as you budget for the future of your business.
Every company’s startup expenses and costs may differ, but chances are you’ll be spending some time and money getting some of these facets of your nascent business in order. And if you do so mindfully — your startup will grow into a full-fledged, successful company.
Expenses Photo via Shutterstock
Shawn Hessinger
Maybe the costs can’t be avoided, but what you can control is the value you get from each of these investments. Each of these costs should be evaluated carefully to be sure you’re not paying for anything unnecessary and to quantify the value your business gets from every dollar spent.
Great point about value. Getting the most bang for the buck is key for SMBs who are often very tight on cash.
And don’t forget that spending money on the right things can save you so much time that it’s worth the expense.
When it comes to the technological side of things, there is a lot of open source software to the highest standard, Wikipedia has a list of the top 100. You could use these to help manage/maintain customer information and relationships. when it comes to the administrative side of things there is no way of doing this without costs, however you can get things very cheap, furniture does not have to be brand new, in fact there are many places that sell bulk office equipment that is sold in sets/matching equipment. good post
Not everything should be taken at the same time. If you start up small, then think of really starting up small. Items 1 2 and 3 would definitely be the first in mind. You could even start up online first and weigh in your chances in the online market. A few people have started small by selling to online marketplaces at first then jumped into creating their own brand and making a name for themselves. What is important is to prioritize investments at first on where to put them. Bigger things, like having your own office and getting staff to lighten the burden could follow if the startup is already running fairly well.
Jim Mickelson
Great post. I think a lot of emphasis needs to be put on the first point, professional costs – especially that of lawyers. I just read a article about how the patent system has required startups to literally hire more lawyers than employees. It boggles the mind.
http://www.techdirt.com/articles/20130501/09000922908/when-startups-need-more-lawyers-than-employees.shtml
marc
I’ve started many small businesses, 4 or so, and each new small business I start I invest less and less into it, until revenue points are reached then I invest a little more. I start out with bare essentials, a basic web site then I work towards a better site 6 months or so down the road, then better tools, and equipment as jobs pick up. Until then you rent, pay as you go when you need stuff so you keep cash in hand!