There is A LOT more to starting a small business then just throwing money at it and “making it work”, or “trying it out”. Understanding small business startup costs is one of the first steps to starting a proper business from the beginning as it’s usually the one factor that makes or breaks a company early on.
In the early stages of starting a small business, one must carefully plan out the financials and the startup costs of the business.
Many startups actually neglect this critical process and end up relying on the customers to keep the organization afloat, usually with disastrous results – and stress to the owner.
Today we are going to be looking at how you can understand Small Business Startup Costs and actually apply the principle for your own business.
Understanding Small Business Startup Costs
An essential step to starting a small business and understanding small business startup costs is creating your business plan.
Your business plan is really a detailed outline as to how the business should operate and be created. The process of developing your business plan actually forces you to understand your small business startup costs in detail as you the costs associated with your business, and costs which add or take away from the bottom line.
Small business startup costs are refereed to startup costs as they are usually expenses which you incur during the process of creating the new business.
While all businesses are different, they actually end up requiring more or less startup cost.
For example: a brick an mortar business such as a car mechanic may have different expenses then a online jewellery making business.However, there are always a few small business startup costs which are common to all types of small businesses. These include:
- Marketing and advertising costs
- Costs of borrowing money (loans, payment, minimums..etc)
- Payroll for yourself and employees
- Purchase of tools, supplies and inventory
- Insurance, licenses, permits
- Cost of starting up (the r&d)
- Tech expenses (phone, internet..etc)
Let’s break down each of these expenses further to give you a better understanding of what your small business startup costs may be.
Marketing and Advertising Costs
When starting a small business in Canada, one of the small business startup costs your business will most likely come across will be costs to promote your business.
Marketing and advertising costs can be anything from business cards, banners, radio ads, internet advertising campaign..etc
Pretty much any costs associated to you as the company trying to promote your business in order to attract an audience (your customers).
Costs of Borrowing Money
If you’re a small business owner with limited capital starting up, chances are that you’ve borrowed money to startup. This money can be from personal credit cards, lines of credit, family/friends, private investors of maybe government funding agencies.
Whatever the case may be, you’re most likely responsible to pay some sort of payments, minimums or at least interest fees back. Other then for those non repayable government funding programs.
Either way, the costs of borrowing money is one of those small business startup costs that you can’t really avoid.
Payroll and Your Employees
Planning on hiring employees? Maybe more – maybe you have to pay for education to get them trained up? Are you paying yourself?
Starting a business and having to pay wages (you included) is considered a small business startup cost that you can’t avoid if you’re hiring.
One way to avoid doing so is not paying yourself (especially if you’re doing this part time and have a full time job), and if you’re not hiring staff.
Purchase of Tools, Supplies and Inventory
Depending on the type of business you’re thinking of starting up, one of the small business startup costs will be your tools, supplies and inventory.
While these expenses may be mandatory in your type of business, there could be options to lower your initial startup costs, depending on a few factors.
Perhaps you can buy used versus new, or maybe you can lease/rent instead of buy. There are also many funding programs offered via the Canadian government which can help you with the purchase of tools and equipment. Do take a look at the Funding Database to get a better idea on government funding programs (grants, loans, tax breaks..etc)
Insurance, Licenses and Permits
Registering your small business, paying for all of the permits and licenses if needed is another small business startup costs a business owner has to consider early on.
While some businesses register as a sole proprietorship or a partnership, some can opt to incorporate which usually results in greater registration fees. Depending on the type of business, location and industry you may also have specific permits which you must obtain or licenses which you must apply for – which can result in additional startup costs.
It’s important to pre-plan and understand what is needed to ensure you can cover these costs.
Small Business Startup Costs
One of the small business startup costs associated with your business would funny enough be small business startup costs.
This means the costs associated with the research needed to be done or the development of business idea prior to the launch of the business.
The small business startup costs which cover your phone/cell phone and internet could fit into utilities expense but the tech costs also include those.
Depending on the type of business you’re in you you may have to cover small business startup costs such as your website, information systems and software (including payroll software, accounting software, tools for marketing..etc)
Understanding your small business startup costs early on, even before you start the creation of your business plan will give you and your business a head start.
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