Article Contributed by Cameron Johnson
It’s vital that your start up business have the right amount of cash to operate. It would be terrible to open your business and have to close a few months later because the estimated costs of running the business were too low. You’ll need to cover expenses while you’re earning enough to break even. That could take upwards of six months to realize.
Calculate Expenses
You’ll need office equipment, software to run your business, supplies, inventory and permits to name a few things your business will need. If you’re opening a brick and mortar business, you’ll need money for rent, utilities and shipping costs. If you’re starting your business online, you’ll need internet service, website services and shopping cart software. Both business types will need business cards, stationary, signs and office supplies.
The plan for the year has to be as detailed as possible. While you can only guess the amount of products or services you’ll sell each month, you have to be as accurate as possible based on studying the market, competition and demand. To budget money for the entire year, you’ll have to estimate a projected earnings report for the next twelve months. It would include fixed expenses, varied operating expenses versus estimated earnings for each month too.
Operating expenses will include things like automobile insurance, advertising and employee wages including your own. You’ll need money for your marketing plan. While social media might be fairly inexpensive, it’s not completely free. The business will need various marketing plans to be successful, and the costs should be listed under expenses. You’ll need a writer to write copy for your website, closed captioning companies for your videos and editing companies for your marketing copy. If you want to create online advertising through social media, those ads will need to be added into the budget. It’s impossible to make money without spending money through advertising and marketing your business.
Calculate Taxes
Estimating taxes can be the hardest part of owning a business. A tax specialist can look at your business and figure out the estimated taxes you should pay quarterly. When a business owner goes from being an employee to a business owner, they don’t always understand that they are responsible for social security and Medicare deductions. Estimated quarterly taxes make it much easier for a new business to pay their taxes instead of waiting until the end of the year to pay one large, lump sum to the IRS.
The Monthly Budget
When you figure out your startup costs for an entire year, you’ll be factoring the estimated sales against the monthly expenses. For the first few months, you can assume that you won’t be making much money at all. You’ll have to make sure you’ve gotten a loan or generated a certain amount in savings for the lean months when you can’t expect to make any money.
Insurance Concerns
Whether you’ll be running an online business or brick-and-mortar business, you’ll need to consider general liability insurance for the business itself. You might need commercial auto insurance, property insurance or workers’ compensation. There are a variety of other insurance needs depending on the industry. You’ll need to research and budget for insurance concerns.
The hardest part of the startup is estimating how much you’ll need to start your business and keep it flowing for the next six months to a year without much revenue entering the doors. You have to research the answer to every question when it comes to startup expenses. You can’t leave anything to chance. If you don’t know the answer, research and research again until you have a solid plan in place for your business.
About the author:
Cameron Johnson is a business consultant and entrepreneur. Over the course of his career he has conducted case studies on both social media optimization and non-profit marketing. Cameron has also had the opportunity to speak at international business conferences and was recently recognized as one of the world’s top 100 advertising experts to follow on social media.