How To Plan For The Cost Of Starting A Business

Starting a business may be the most expensive financial decision you ever make.

 

We all know that buying a home, and even moving to a new house in general, is expensive. And then there’s the cost of starting a family. But other than some of the more momentous life experiences, there’s also the idea of starting a business.

 

Now, for some starting a business can be inexpensive. It’s definitely safe to say that you can bootstrap it. But sometimes, there are expenses that you need to account for. And it always helps to be able to save up for the things you need. In order to do that, you need to plan for the costs that may come your way.

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Use these tips to plan for your business startup.

 

Create a Business Plan

 

You can’t always foresee or budget for every single thing in business. But, when you draw up a business plan, you will find that it’s much easier for you to work out what sort of costs might be coming your way.

 

A business plan should include the following:

 

• The problem: What problem does your product solve, and how urgently must the problem be solved in the minds of your customer?

 

• Differentiation: How is your product different than other offerings in the market?

 

• Pricing: How much are customers willing to pay for your solution? A great way to find out is to perform market research. Ask a group of people to try your product. After they use your product, find out how much they would be willing to pay for your solution. If the price allows you to cover your costs and generate a profit, you may have a valid business idea.

 

• Market size: This is the tough part, because you need to find a market that is large enough to justify starting your business. In most industries, you can determine the dollar amount of sales for a product or service. If, for example, you are entering a $50 million industry, you can calculate the potential size of your market by the percentage of the market you hope to control. 10% of a $50 million industry, for example, would be a $5 million business.

 

You can find great business plan software to help you create your plan, including tools to generate projected financial statements.

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Save as Much as You Can

 

Here are some steps you can take to build a savings account:

 

• Create a budget, even if that budget is simply on notebook paper.
• Separate your expenses between fixed and variable, and take a hard look at your variable spending.
• Take steps to cut your variable expenses each month and put the amount you save into a separate savings account.

 

So it’s a smart idea to build a savings balance, in order to cover your living expenses when you start the business full-time, and you have no guaranteed income.

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Learn as Much as You Can

 

And at the same time, you will find that it really helps if you can learn as much as possible about the world of business and what you want to do.

 

Here, you can read, listen to podcasts and watch videos, attend conferences, and even take courses. You can also look to entrepreneurs, such as Kurt Svendheim, to see what they do. When you can learn from the actions of others, you can often keep the costs down and, in turn, learn as you go along too.

 

Minimize Your Expenses

 

The next thing you’ll want to do here, is to look to cut some of the costs you have in your living expenses.

 

If you need to pay for services or assistance or materials at all – even if the cost is small – it’s so important for you to have that money available. And when you’ve done an assessment of what you’re paying out for each month, you should easily be able to make cuts and make that possible.

 

Always Take Freebies

 

Finally, when you’re first starting out, it’s always a great idea to accept freebies or to look for great deals whenever you can. Of course, you may not always have this opportunity, and that’s fine. But if you do get offered free advice, materials, software, samples, or anything else then definitely snap it all up. It’s just so important for you to be able to keep your costs low, look for great deals, and accept generous and valuable help when it’s offered.

 

Use these tips to plan your business startup and to finance your new venture.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

Image: Andrew Neel