Calculating Start Up Costs

Ben Wood, Thursday, May 01, 2014

Start-up costs refer to the total cash amount needed to get your business up and running.  This is important because you don’t want to be caught short before your opening day!


How to calculate your costs 

List everything that you will need to pay for up front prior to launching your business.  These can be separated into the following categories:

Capital costs

Depending on the type and size of business, the capital costs could be either substantial or fairly minimal.  Capital costs include things like lease of premises, fixtures, fittings and furniture, equipment and vehicles. 

Establishment fees

These expenses are for things like legal fees, registrations and permits, website or logo design fees; things necessary to establish your business.  

Initial operating expenses

It may be some time before your business generates a substantial profit.  So it’s important to have cash available for operating expenses in the meantime.  As a guide, calculate your operating expenses for one month, then set aside enough to cover you for six months. 

Personal living expenses

In addition to setting aside enough to cover your initial operating expenses, it is recommended that you set aside enough cash to take care of your normal living expenses for those initial six months.

Estimating the costs

It is better to overestimate than underestimate your start-up costs, but try to be as accurate as possible.

Discuss prices with your suppliers, contact the relevant government departments about any necessary registration fees, and speak to property managers about leasing costs. 

You may find it helpful to speak to other business owners as quite possibly they’ve encountered some hidden expenses, especially in the early stages.  So if possible, allocate an additional 10% of your budget to ‘miscellaneous’ expenses – just to be on the safe side!

Once you have a good idea of what your start-up costs are likely to be, you’ll be in a good position to decide on the most suitable way to finance your business.

YOUR ACTION PLAN

  • Calculate your initial capital costs.
  • Calculate any professional or regulatory expenses you need to pay up front.
  • Set aside enough cash to cover your operating and living expenses for the first six months of your new business.

Contact Wood Accounting team today on

1300 098 852

for assistance with this Action Plan!