Starting your own business will be one of the most liberating, fulfilling things you’ll ever do. It gives you the freedom to be your own boss and answer to no-one but yourself. You can choose your clients and target your specific audience. Most importantly, you can chase your dreams and work in the area where you passion lies. However, it’s not always that simple. Money will always be the biggest factor in starting a new business. And it’s those initial startup costs that can be the most damaging. How exactly do you get through that difficult first year? Today we’re going to show you how to budget for that first year of costs.
In business, your assets are the physical necessities for your business. If you’re starting a plumbing business, this will be tools, a van and ladders, for instance. If you’re an engineer, you’ll need to budget for Statewide spherical bearings and machinery. If your plan is to open a shop, you’ll need the initial stock, the till and shelves. Budget for these initial costs by obtaining quotes and making inventories. Naturally, you should try to slimline how much you need right at the start.
Your expenses are slightly different to your assets. These are all the auxiliary costs that are involved in setting up your business. This will be the cost of hosting and building a website for your company. It could be the rent on office or studio premises. If you’re planning a slightly larger launch, any wages for employees will fall into this category. Finally, any legal fees should be listed here. Essentially, any additional costs that creep in should be accounted for. Between your expenses and your assets, that’s your startup cost. However, it doesn’t end there.
No business can exist and suddenly begin trading. You need marketing and promotion in order to get those first few customers rolling in. Often, this is difficult to calculate until you get started. Take the time to research exactly what you need. It could be digital marketing, traditional local ads, PR or a combination of each.
Loss of Earnings
Another cost to take into account is any loss of earnings while you get set up. You can always start building your new business around an existing job. But, at some point, you’ll have to make the dive into your business full time. You’ll have to factor in any loss of earnings here.
Project the First Twelve Months
In order to create a strong budget to work from, you’ll need to make some rough projections. All business advisors will suggest a different time period, but we’ll stick with an average of 12 months. Build your assets, expenses and promotional costs into this budget. Then try to balance it with projected earnings over the twelve month period.
Balancing the finances of your first year is tough. Take your time to get deep into the finances and set aside an emergency budget. Make a strong plan and you’ll know what to expect!