Startup companies often fall flat on their face for many reasons. One of the main reasons is not realizing how much investment they’ll need at the beginning. They underestimate the startup expense and face a massive push back.
To make sure this doesn’t happen to you when you work on your next startup, I’m going to explain the 6 main expensive that pile up as your primary startup investment.
1. Business Equipment
If you are planning to set up a retail business, you can guess what expense I’m talking about. From the store shelves to the cash register, everything falls under business equipment.
Even if your business is online, don’t think you won’t have to bear these expenses. Online business requires as much investment for the business equipment (in this case, web hosting, software, tools, CRM, etc.) as the retail store next doors.
Depending on the business type, target audience and niche, the primary business equipment expenses can sum up to $150,000.
You got your primary equipment to start the business. Now you need to fill up your inventory, storage or reserve with raw material or produced goods.
Depending on your business type, products and size, it will make up for almost 25% to 40% of your total budget or primary investment.
3. Promotion, Advertisement & Marketing
No matter how massive your inventory is, you won’t make a sale unless you did proper marketing campaigns, promoted the products and advertised your business.
Even though it is not directly connected to the primary investment like inventory expense or business equipment, it is not something to take for granted.
Keep at least 10-15% of your budget for good use in marketing campaigns or even more, depending on your competition in market.
4. Legal fees & licensing charges
Want to be a sole proprietor or a Limited Liability Company? Do you have partners? Did you decide to go incorporated?
Depending on the answer, you’ll need to form an entity and that will cost you a specific legal processing fee or licensing fee. Don’t worry, it’s a small cut, not as huge as business equipment or inventory expenses.
If the business equipment expenses or the inventory expenses didn’t hit your wallet hard, it will.
Payroll includes paying up your staff including yourself. This is one of the biggest expenses for any business. If you are just starting new, almost 40% to 55% of your primary investment will go to the payroll expenses. And the toughest part is, even if your business doesn’t do good in the initial stage, you’ll need to keep the cash flow going to keep the business on its feet.
Business insurance is as important as your health or car insurance.
Unlike most of the expenses here, it is rather a long-time expense than a one-time investment.
Depending on your business size, you’ll need to pay a specific amount every year to protect your business from angry customers. If you can successfully estimate these 6 expenses for your startup, you’ll get a close-enough estimate of your primary investment and won’t fall short in the initial stage of your business.
For more info, please visit: Charles Carillo0