Preparing For Startup? Plan For Expenses
 Terry M. Blair

Starting your own business comes with excitement and maybe a few nerves. It also comes with a long list of expenses.

To avoid a false start, get realistic about the basic costs your new venture will incur. Planning for expenses will improve your cash flow and help you avoid unexpected costs.

Here’s a brief list of expense items that most small-business startups should take into account. Add to this list any costs related to your specific business. The result should be a good starting point for planning startup costs.

Office Space Costs
Whether you lease a manufacturing facility or work from a home office, you’ve got to have a place to conduct business.

If you lease a space, be sure to anticipate more costs than a rent payment. You may also need to plan for insurance coverage, rental deposits, utility expenses and janitorial services.

Working from home doesn’t give you a free ride either. You may need to broaden your homeowners’ insurance to cover business equipment and expanded liability. Or you may need a separate business owners’ policy, also known as a BOP. And more insurance means more expense.

Remember too that you’ll probably need an additional telephone line for your home office. And you might want to spring for a broadband Internet connection.

Office Gear Expenses
From a desk and a bookshelf to a computer, printer, scanner, copier and telephone, office gear is going to cost you. But the expenses don’t stop at the moment of purchase.

You may need to buy extended warranties for pricey equipment. You might need to budget for repairs, upgrades or maintenance contracts.

To keep your equipment costs from ballooning, make a list of the equipment you must absolutely have to conduct business. Add up the initial cost of these must-haves, including maintenance contracts or extended warranties.

If there’s money left in your budget, start adding the cost of equipment that you’d like to have. Or upgrade your equipment wish list to reflect more bells and whistles.

Also plan to spend money for business software. You may need accounting software or a software package to manage your contact list.

Marketing Costs
From business cards to billboard ads, your startup venture will need marketing to attract customers. Don’t underestimate its importance or its cost.

Marketing needs vary from industry to industry and from business to business. Here’s a checklist that will help you avoid overlooking many basic marketing expenses:

• Business cards, letterhead and envelopes

• Logo creation

• Web site development, hosting and domain name registration

• Building or office signage

• Networking expenses (fees to join networking and professional organizations)

• Development and printing of brochures, sales letters, price sheets, flyers and other collateral

• Advertising (newspapers, search engines, magazines, etc.)

• Development and printing of a press kit and other PR materials

Financial Expenses
You’ll need a bank account for your startup business, separate from your personal account. Try to find a bank that doesn’t charge a monthly fee. Otherwise, budget for the expense.

If your small business decides to accept credit card or debit card payments, a merchant account will cost you. Typically, you’ll pay for the initial cost of equipment, plus monthly minimums or processing fees.

Professional Services Costs
Every startup needs the guidance of professionals. So earmark some money for the expense.

A tax professional can help you set up your bookkeeping and assist with tax planning. She can also provide insight into which type of legal business entity – sole proprietor, corporation, limited liability company, etc. – is best for your startup business.

An attorney can help you draft client contracts and review agreements with suppliers. He can also guide you through the process of incorporation.

If you’re clueless about marketing and don’t have time to learn, a marketing consultant or public relations firm might be in order. But as always, you’ll pay for the expertise of these professionals.

Tax Expenses
Don’t overlook taxes. As a new business owner, you have to pay as you go. That means making quarterly estimated tax payments. Figure the expense into you initial budget.

License & Certification Costs
Some businesses require national, state or local licenses. Some require filing a DBA (doing business as). Others are legally required to acquire periodic professional certification. If your new venture falls under any of those requirements, plan for the expenses.



(Posted May 2005)

>>Back to Startup Success