Are you interested in starting up your own business but have little to no idea how much it will take to do it? Are you in the process of “guesstimating” how much cash you will need? There are some simple steps that can help you as you calculate your startup expenses. Keep in mind that it is impossible to foresee everything, but these steps will help you piece together the basics so you have a rough idea. Hopefully, they will help you to avoid a lot of heartache and stress down the road.
As you reach for the pen and paper, plan to include two different lists for your starting costs: expenses and assets.
Step 1. Begin by listing all of the expenses that you expect to have that are associated with starting up a business. Be sure that you add expenses like fixing up the location of the business, legal expenses associated with setting up a company, the cost of designing a logo, etc.
Some expenses that you need to include are actually common running expenses. For example, rent and payroll. At first glance, these costs may seem strictly running expenses, but look again. Both of these expenses will occur before you launch your business. The majority of startups have to pay rent for the location as well as pay their employees before their opening day. So be sure to add these to the list of startup expenses as well as running expenses.
After you feel that you have included all startup expenses, you can use them to create a formal accounting loss for the startup of your business. This loss will not matter for your taxes until your business experiences a profit. When that occurs, this loss can then be deducted against the taxable income.
Step 2. Next, you must consider the assets that your type of business requires you to purchase. Will your business require furniture, vehicles, land or equipment? Each of these items needs to be detailed along with its cost. Keep in mind that these items need to be listed as assets, not expenses. These assets cannot be deducted from income later, but you can depreciate them as an expense at a later point in time. Do your best to obtain estimates of the cost of each asset.
Step 3. If you speak to others who have gone through this same process, they will more than likely tell you that you need to have six to twelve months’ worth of expenses before you begin your startup. Make sure that your list details the money that you need to have, not necessarily what you want or wish to have. Having an excessive stockpile of cash ready and waiting is probably not very realistic.
Another option that might help you as you plan and prepare for your startup is a Startup Business Cash Advance. 1st American Merchant Funding specializes in offering startup and high risk businesses merchant cash advances. Once accepted, you can expect to receive your funds within 72 hours. Payments are revenue based, so your startup experiencing an unexpected slow month is not a problem. As you carefully plan for your startup, don’t forget to consider a Startup Business Cash Advance.