Recently, you took the first step in starting your business. You want to secure startup funding, but you must determine how much to request.
The U.S. Small Business Administration breaks down how to determine business startup costs. Learn how to attract investors by showing them you understand the costs of doing business.
The basics
No matter what industry you want to go in, all businesses have similar startup expenses. Examples include making a business site, office space, communications, marketing materials, utilities, insurance and employee wages. You may also know of expenses particular to your industry and business, so add those, too.
The estimate
Once you note as many startup costs as possible, determine how much you expect to spend on them. The numbers depend on whether the expense has a specific cost, such as a business license. Consider contacting local business owners, vendors and service providers for any costs you must estimate.
The full picture
After calculating well-defined costs and estimates, divide them according to monthly expenses and one-time expenses. Examples of one-time expenses include getting a business license, creating a logo and paying fees. Remember, you may deduct one-time expenses on your taxes, so keep close track of them.
Examples of monthly expenses include business insurance, paying employees and paying rent and utility bills. Aim for calculating five years of monthly expenses, but one year could be enough for potential investors.
The funding
With all your calculations and expenses, you have something to show investors. Consider drafting a formal report of all your expenses, one that includes projected revenue.
The right numbers and expenses could help you bring your business to life. By getting the full financial picture, you could help set your company up for success.
