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How to Organize and Plan Your Small Business Startup Costs

"If we did all the things we were capable of, we would astound ourselves."
Thomas Edison

One of the most challenging aspects of starting a new business is having the cash on hand to cover all of your essential startup expenses without overextending yourself. Having a comprehensive business plan with realistic financial forecasts can help you create a solid foundation and improve the likelihood of your success. We know this can be overwhelming, so to help you get started and avoid missing essential costs, we’re sharing how to organize the most common start up expenses so you can then plan on how much they will actually cost. If you invest the time for this step and pull in the professional, you will save a significant amount of resources.

Knowing Your Startup

First, you need to know exactly what kind of business you’re starting so you can map out and organize your costs more accurately. Most small businesses fall into one of three categories:

  • Brick and mortar business, such as a retail store or restaurant.
  • Online business, such as insurance agent, consultant, or even eCommerce.
  • Service-based business, such as a plumber or electrician

Each of these types of businesses will have different costs associated with startup. For example, a brick-and-mortar coffee shop will require rent, utilities, equipment, and inventory, as well as legal and administrative costs. On the other hand, an online business that you operate as a sole proprietorship out of your home will have significantly fewer costs.

Before you begin organizing your costs, it’s important to outline exactly what your business is and how you will operate so you can have a more accurate forecast of both upfront and ongoing costs.

Categories of Expenses

When you’re listing your applicable expenses, we would recommend having a general ledger or spreadsheet on hand to detail your categories and sub-categories as well as leaving spaces for forecast costs and actual costs. Remember to also determine ongoing costs for several months as it may take time for your business to generate regular, reliable revenue.

While the list below is not exhaustive, it does give you a foundation for expected costs, though depending on your industry and business setup, not all of these will be applicable.

Legal Costs

  • Creating a business entity, such as sole proprietorship, limited liability company, S-corporation, or C-corporation. Often these require application and filing fees.
  • Filing business certifications and licenses, and
  • Filing any state or local business permits, including sales tax permits.

Tax Costs

  • Paying for accounting or bookkeeping software, and
  • Quarterly estimated taxes and annual taxes based on revenue.

Payroll & Employee Costs

  • Net pay for employees or any 1099 contractors you may work with,
  • Commissions or bonuses,
  • Unemployment insurance,
  • Payroll taxes, and
  • Employee health insurance and other benefits.

Insurance Costs

  • Liability insurance,
  • Errors and Omissions insurance,
  • Worker’s compensation insurance, and
  • Commercial property insurance.

Location Costs

  • Rent,
  • Utilities,
  • Office furniture,
  • Technology, including computers and phones,
  • Equipment, such as tools and cash registers, and
  • Product inventory.

Marketing Costs

  • Website,
  • Digital marketing, such as social media advertising or email marketing,
  • Conferences, conventions and the like, and
  • Physical marketing, including business cards, location signs, or mailers.

Professional Costs

  • Working with an attorney to set up your business structure or draft contracts and documents,
  • Working with an accountant to assist with tax preparation or bookkeeping,
  • Hiring a web designer to build your website,
  • Membership to professional associations, and
  • Hiring a business consultant to help you plan and strategize your business.

Working with a Strategic Planning Firm

Before you begin exploring loans, estimating your costs, or even writing your business plan, strategic planning is crucial to your success. This allows you to create a business plan that outlines the purpose of your business and your mission statement, as well as your financial considerations, budgets, and forecasts. Strategic planning also allows you to create a defined path forward to opening your business, focusing on your objectives, helping you set goals, and putting forth a clear blueprint for how you want to start and operate your business.

Not only will this help keep you from getting overwhelmed and allow you to maintain your focus on what you really want for your business, an experienced strategic planning professional can help you reduce unnecessary costs, effectively estimate necessary costs, and start your business aligned with your goals and focused on future success.

Please remember that each State has its own laws. Your Secretary of State is often a great resource to help you get started. This publication is in no way a completed document, but is only designed to provide basic and initial recommendations and ideas to help you get started.

Please remember that markets and circumstances vary.

The information submitted is not guaranteed to produce any particular results. In addition, Woodland Strategies provides services related to strategic planning, marketing and leadership coaching, and is not engaged in rendering services or advice pertaining to accounting, legal or other professional areas. Clients requiring such services are advised to consult with the appropriate professional(s).

Schedule a Consultation with a Woodland Strategies

We understand the challenges involved in starting a business and are dedicated to helping small businesses and startups succeed. At Woodland Strategies, Inc. we provide strategic planning, business development, and marketing support to help you start your business with a growth-focused strategy in place and a message that is tailored to attract your target audience and connect with new clients from the very beginning. To learn more about our services or to schedule a consultation with our strategic planning firm in Minneapolis, fill out our contact form to get started today!

This article or any other promotional material(s) from Woodland Strategies, Inc. is in no way intended to be a comprehensive plan.

Please note all markets, circumstances, and results vary. Any strategic plan or marketing initiatives must follow all State and Federal laws and regulations, accordingly.

Please contact us directly for a complete assessment and plan for your individual organizational needs.

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