You have the idea and the vision for your own business. Now the question comes: “How much money will I need to start a business?”
For entrepreneurs who are eager to open the doors of their own company, answering that question requires careful consideration of many factors.
No two businesses are alike, but there are many resources, as noted in the recent article Top 20 Web Resources for Business Newbies, to help business owners make the right assessments.
This article examines some of the factors entrepreneurs must consider when embarking on a new business venture.
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Different Expense Types
Entrepreneurs need funds for both capital and operating costs. Here is a detailed rundown of the types of costs associated with each expense:
- Capital. You will need funds to identify sites and, if building your own site, the costs of architectural and engineering work, construction, furniture, security systems, fixtures, and landscaping. You also may need to secure supplies to open the doors such as signage, local occupancy fees, and licensing fees. Some equipment can be amortized, meaning you can write off a portion of its value each year.
- Operating. You need light bulbs to keep the lights on, office supplies, goods to be sold, promotional materials, advertising, and utilities. You will also need to pay wages and employment taxes.
There are other start-up costs, many of which are tax-deductible, to consider:
- Market research
- Mileage to scout locations, meet with professional consultants, tolls, and parking fees
- Training for new employees
- Insurance for your business and your employees
- Professional services, such as accounting and legal help
If you are purchasing a franchise, there are special costs to consider as well, including an initial franchise fee, which gives you rights to the names, business processes, service marks, and trademarks. You will also pay a portion of your monthly revenue to the franchisor.
Franchise start-up costs vary widely depending on the franchisor and, often, the population density of the area of business.
With all of these costs, it pays to shop around. Suppliers and vendors may offer package deals or new-business promotions. They can also help advise you on what you really need and can forego, at least at first. Also consider buying gently used fixtures, furniture, and equipment, which can save you money.
Paying Yourself
When you are starting your own business, you also need to account for your personal expenses. A clear understanding of your personal finances, including savings and retirement assets, is important to ensure that you can meet your monthly expenses, especially in the early months or years of your new business.
Planning can go a long way toward choosing the right business to open and the right time to open it. Finding the capital is where Benetrends can help.
Benetrends pioneered the use of using existing 401(k) or IRA funds to finance small business startup loans. By structuring the business as a C corporation, owners can use retirement funds to provide much needed capital to open those doors. To learn more about how Benetrends can help your business dreams become a reality, download The Definitive Guide To 401(k)/ROBS Business Funding.