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Understanding small business startup costs

accountant37004762.jpgIf you are considering opening a small business, the first things you need to do is figure out how much money you need. This can be daunting since determining how much money you need to start your own business, can be a challenge. It is important to keep in mind, that in most cases, the amount that someone needs to start a business is vastly different,from what is actually spent. You should understand that 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. It can leave you wondering where to start. But you shouldn't be discouraged, since there are a number of different thing,that you can do to get as close as possible,to what your actual start-up costs will be. Here is what you need to know about understanding small business startup costs-

Have a realistic understanding of what your true costs will be-Keep in mind that while determining what things you will need to pay for,may not seem like such a difficult thing to do, what happens is that many people simply forget all of the small things , that take up time and resources. To avoid this trap, all that you need to do is take the time to come up with a comprehensive list of costs. Obviously since every business is different, the costs of each business will not be the same.This means that you cannot go off of any one costs list that you may find. However, basic lists ( like the one below),are a great place to start to build the foundation of your costs list. You can use this list and then simply add your own specific costs, and calculate the total,to determine approximately how much money you need to start your small business.

Typical business costs are:
1. Registration fees (i.e. business name, legal fees, lease agreements, trademarks, domain name, etc.)
2. Licenses
3. Special equipment (i.e. manufacturing equipment, materials, molds, etc.)
4. Raw materials and labor (this is the materials and labor costs that you need to produce your product)
5. Computer
6. Fax/ phone/internet (material, installation, set-up, monthly fee)
7. Other office supplies
8. Furniture (including desks, chairs, d├ęcor, etc.)
9. Advertisements/marketing (i.e. flyers, ads, radio announcements, TV spots, etc.)
10. Grand opening costs (i.e. party supplies, ads, giveaways, invitations, etc.)
11. Other

It is highly probable that some business costs, necessary to run your small business, were not included in this list. Keep in mind that while some of these costs are specific to your business and its individual start-up needs, there are additional costs that will be required to keep your business running. Along with initial startup costs, you should also consider the costs of keeping your business in operation.

Here are some ongoing costs that are essential to the smooth operation of any small business:
1. Merchant account, bank and special licensing fees and renewal costs
2. Rent or mortgage
3. Regular utility costs (electricity, heat, water, phone, internet, etc.)
4. Business loan repayment and interest
5. Wages
6. Your income/salary (keep in mind that if you don't budget for it, you won't get it!)
7. Bookkeeping
8. Other

Finally, it should be noted that many savvy business owners like to include a financial cushion,for themselves,in case of an emergency. An emergency fund is usually determined by taking your monthly costs and multiplying them by as many months as you think you may need, a contingency fund for. Keep in mind that it may become necessary to change the total amount that you have in your emergency fund as you continue operating your businessand develop a better idea of how much you actually need to stay in business.

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