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The money you need to start your small business

businessmeeting26246912.jpgDetermining how much money you need to start your own business can be a challenge.In most cases, the amount that someone needs to start a business is different from what is actually spent.While it would be nice to have some way of calculating exactly what amount you will need to start your business, it is nearly impossible to do so.So where can you start?Don't be discouraged, there are a number of different things that you can do to get as close as possible to what your actual start-up costs will be.

Determining how much money you will need to start your small business starts with knowing what your costs are.While determining what things you will need to pay for may not seem like such a difficult thing to do, what many people do is simply forget all of the small things that take up time and resources.To solve this problem, all that you need to do is take the time to come up with a comprehensive list of costs.Naturally, because every business is different, the costs of each business will not be the same.So you cannot go off of any one costs list that you may find.However, lists like the one below are a great place to start to build the foundation of your costs list.Here is an example of the kinds of things that you may need to spend money on to start your small business.Simply add your own specific costs to the list and calculate the total to determine approximately how much money you need to start your small business.

Business startup costs

  • Registration fees (i.e. business name, legal fees, lease agreements, trademarks, domain name, etc.)

  • Licenses

  • Special equipment (i.e. manufacturing equipment, materials, molds, etc.)

  • Raw materials and labor (the materials and labor costs that you need to produce your product)

  • Computer

  • Fax/ phone/internet (material, installation, set-up, monthly fee)

  • Other office supplies

  • Furniture (including desks, chairs, d├ęcor, etc.)

  • Advertisements (i.e. flyers, ads, radio announcements, TV spots, etc.)

  • Grand opening costs (i.e. party supplies, ads, giveaways, invitations, etc.)

  • Other

Chances are that you thought of some business costs that were not included in this list.While some of these costs are specific to your business and its individual start-up needs, there are additional costs required to keep your business running.It only makes sense that you should also consider the costs of keeping your business in operation when you calculate your start-up costs.After all, what good is a business that you can afford to start, but can't afford to keep going!

Here are some ongoing costs that are essential to the smooth operation of your business

  • Merchant account, bank and special licensing fees and renewal costs

  • Rent or mortgage

  • Regular utility costs (i.e. electricity, heat, water, phone, internet, etc.)

  • Business loan repayment and interest

  • Wages

  • Marketing

  • Your income/salary (if you don't budget for it, you won't get it!)

  • Bookkeeping

  • Other

Many smart business owners like to include a financial cushion for themselves in case of an emergency.An emergency fund can be determined by taking your monthly costs and multiplying them by as many months as you think you may need a contingency fund for.The best way to contribute to this fund is to simply put a small percentage of your increase into the account every month.It may become necessary to change the total amount that you have in your emergency fund as you continue operating your business and develop a better idea of how much you actually need to stay in business.

If you find yourself falling short in what you need to start or keep your business operational, it is then necessary to consider what options you have for raising capital.These options could include selling some of your personal assets and raising the money yourself (always a good option) or getting a loan.

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