David Deicke talks about the cost of new business start ups
I’m David Deicke and I have started up a few businesses over the years, all with varying successes. One of the challenges of planning and getting a new business off the ground is establishing what your start up costs will be. At best, it’s going to be a guess, but there are some specific steps you can take to make your costings more realistic.
Estimating Your Costs
If you are seeking bank finance the dreaded Business Plan is required! The Bank Manager is not going to be impressed by a comment such as, “I think my start up costs are going to be around $10,000.”
Secondly, you need to go into any new venture with your eyes open. You have to be as sure as you can on how much it’s going to cost to get your new business started. There is nothing worse than getting 90% of the way there, only to fall at the last hurdle because you didn’t carefully consider one expense.
Lastly, as a start up you are likely to only have a limited pot of money available. You have to prioritise which costs are essential and which can be delayed until the business is more established. You can only do this if you have researched and understand what your costs are going to be.
Where To Go For Help
Your government may have a support and business advice department. There are government funded organisations which are there to provide free and impartial advice on all aspects of running a business.
They can have a wide range of material and experience which will give you a good grounding in the costs you will have to cover. The service is usually free, so that’s one cost you won’t have to worry about!
Chamber of Commerce or Local Business Groups
If you have a Chamber of Commerce or any formal or informal business group, then they are a good source of knowledge and information. Within the group you will find a wealth of experience and people who have been through it all – good times and bad times! You may be lucky enough to attend a meeting when a speaker is there on just the topic you are looking for.
Other Business Owners
If you don’t have a club or group you can attend, then seek out business people yourself. Ask all your contacts to tell you about their start up experiences. What costs they budgeted for; what costs they didn’t budget for; where they overspent. Genuine business people are usually happy to share their experiences and give you advice. Listen to what they have to say and take note.
If you don’t have a circle of business contacts, put the word out to all your personal friends. A few of them will have friends or relatives who are in business on their own. Ask for an introduction or referral. This will ‘warm’ them up before you ask your searching questions.
Bank Business Guides
Some Banks provide brochures on starting up in business. They usually contain a Business Plan template which will include a section on start up costs. Some go further and produce guides for specific industries and sectors. They provide in depth analysis about the business, the market, the competition and estimated start up costs. Call in to your local Bank and ask to see the Small Business Manager.
If you are looking to cost your raw materials or partly finished stock for buy in then, as a key part of your financing, call your potential suppliers and ask for quotations. Tell them that you are starting up and they should be more than helpful, after all you could be a potential customer!
Examples of Start Up Costs
Here are some of the key costs that you should factor into your start up:
• Fixtures and fittings
• Initial stock
• Legal & professional fees
• Specialised computer software
• Up front rental payment
• Initial cash float
• Cash to cover trading for the first month or two until the payments start rolling in
The list is by no means exhaustive but it will provide you with the first step to finding out how much it will cost you to start up.
Getting a new business off the ground is difficult enough, even if you fully understand what it’s going to cost you. Doing it with no idea is not going to work out for you.
Good Luck with your start up!