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    Posted by Shane McQuillan 26 Jul
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    Starting Your Startup - What is the average cost to start a business?

    Congratulations on taking one of the first steps to getting your startup company off the ground and into the hands of your potential users and customers. While we're often led to believe that kicking off a startup is as simple as coming up with a name, it isn't. Let’s look at the average cost to start a business in today's market.

    One of the ways that we can be harshly reminded of this is when we fail to do the maths of what it will cost to get started. Yes, summing up the kind of costs involved with setting your startup off the ground can be a bitter pill to swallow. But if you want your company to survive the first year and even (hopefully) become a unicorn, you need to do the math.

    So what will tabbing up the cost of setting up a startup help you to do long-term? Quite a lot. Here are just some of the ways that it can help:

    • It can help you to easily calculate forecasted profits
    • Understanding the potential costs can also help you to conduct a break-even analysis of your business
    • Having estimated costs annually can help you provide a better appeal to potential loan providers
    • Additionally, if you can show the costs of your business along with what makes your company profitable, you can effectively draw in investors
    • Save more money on annual taxes.

    With these just being some of the advantages that come with forecasting costs, what do you need to take into consideration when starting up your business?

    Identify What Startup Expenses you Have

    Anything that you need to get hold of to operate a functioning business long-term is what you need to factor into your expenses report. While some of these are more self-explanatory than others, others, like third party market research, retaining a dedicated accountant and legal counsel, along with the necessary licenses all come into your equations.

    Here's a list of what you should factor in:

    • Office space - which can fluctuate depending on the amount of space you need
    • Equipment and supplies - No matter how small, these supplies all need to be added in
    • Communications
    • Utilities
    • Insurance
    • Inventory - This includes monthly inventory rental and potentially insurance
    • Employee salaries
    • Advertising and marketing
    • Printed marketing materials
    • Making a website

    These same costs also change depending on the kind of business you're running on as well. So consider the type of costs that come with working as a:

    Brick and Mortar company

    Online-facing Store

    Single Service provider

    The Full Picture Clearly - Add up all of These Costs

    Once you have all of these singular expenses taken into account, add them all up into collective lists of annual and monthly expenditures.

    The annual costs typically consist of those one-time payments needed to start your business. These being developing the website, purchasing equipment, securing the right kind of insurance and permits to operate legally, etc.

    Monthly, in contrast, refers to your insurance payments, outgoings for inventory and workspace rental, along with monthly payments in salary to your employees.

    The result? Having all of these expenses lined up allows you to more effectively forecast how much business you need to do to make a profit each month, quarter and year.

    For investors, this is a BIG plus; if they can easily see that you've taken all of your costs into consideration and planned accordingly, it allows them to look at your business as a credible prospect for them.

    Though maintaining this calculation system, you will be able to validate and calculate the average cost to start a business.

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