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Start Up Costs

Table of Continuing and Initial Costs

One of the initial jobs of starting a brand-new business is a realistic look at costs. Too often, new entrepreneurs tend to concentrate on the upside, with the assumption that whatever costs occur, they will be covered by sales. That can be the case, but the usual scenario is that revenue starts flowing towards the business slightly later than anticipated. That is why it is very important to try and project both ongoing and one-off expenses.

This is by no means an exhaustive list of possible expenses that you may incur as a new business owner, but obviously everyone has their own variations so do please take this list as an ‘aide memoire’ and modify it for your own purposes.

MONTHLY EXPENSE

AMOUNT

Your Salary/wage
Other wages
Rent or Lease (office or premises)
Living Expenses
Personal Rent or Mortgage
Marketing/Advertising
Business Consultant
Accountant
Tax Specialist
Stock
Telephone
Gas
Electricity
Web Design
Computer Expenses
Broadband
Licences/Permits
Furniture
Mobile Cellphone(s)
Vehicle Rental/Finance
Travel Costs
Fuel Costs
Printing
Logo
Headed Notepaper
Business Cards
Insurance
Pension
Business Consumables
Clothing
Loan Interest
Sundries – Contingencies
Presentation Materials
Legal
Sundry Stationery
Import Duties
Taxes
Postage

The costs above, as explained above, represent monthly outgoings. The other costs which you need to think about are your initial one-off costs such as:

Machinery/Equipment
Printer
Computer/pad
Installations
Initial Stock
Electricity Deposit
Phone Deposit
Software
Shop or Premises Fit-out
Registrations
Permits
Deposit for Premises
Cash in hand
Unallocated Contingency Costs
Initial Printing (Marketing etc)

If you write down your expenses in a list such as the one above, it will give you an excellent idea of how much revenue you need to generate and that will of course give you a very good starting point for pricing. If you want to look at a running total and be able to tell immediately whether you are doing better or worse than plan, it is a very simple process to set up a basic spreadsheet which you can keep up-to-date on a weekly or monthly basis.

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AN UP-TO-DATE BUSINESS PLAN THAT INCLUDES:

One- and three-year projections
A capital budget

AN ANNUAL MARKETING PLAN THAT INCLUDES:

Precise sales and profit goals and timetables
Strategies and tactics for the next three years
Budgets, Forecasts, and Benchmarks
A tentative sales plan
My marketing plan also includes:
The demographics of my target markets
A thoughtful definition of the markets we serve
A definition of the needs/wants our products and services fill
An analysis of the growth potential of our markets
A competitive analysis
A definition of our "Unique Selling Proposition"
Projections for other products or services that could be developed
Timetables for research and development

MONTHLY BUDGETS AND STATEMENTS THAT INCLUDE:

Thorough and up-to-date records
Cash flow budget
Profit and Loss (Income) Statement
Balance sheet
Deviation analysis
Standard cost comparisons
Cash reconciliation

AN INFORMATION BASE THAT ALLOWS ME TO:

Keep track of new developments in the industry
Obtain and study key trade information
Understand what “state of the art” means in this business
Provide customers with the best available information about our products and services
Keep all our employees adequately informed

I’M CERTAIN THAT THE BUSINESS IS PROPERLY CAPITALIZED BECAUSE I:

Base capitalisation on worst-case planning
Have emergency funds (or access to them)
Have discussed this with my banker

I UNDERSTAND THE VALUE OF THE BUSINESS BECAUSE I’VE MADE USE OF:

Professional appraisers
Present value methods to evaluate terms
Professional tax planning
Accurate, timely financial information

I STRIVE TO IMPROVE PRODUCTION, QUALITY, AND OPERATIONS BY:

Keeping the equipment in top condition
Maintaining safe conditions
Establishing high standards
Standing behind our products and services
Not tolerating shoddy performance
Working for consistency
Using our company’s “look” as a statement to our markets

PERSONNEL DECISIONS ARE BASED ON HUMANE, CAREFULLY CONSIDERED POLICIES THAT INCLUDE:

Checklists to make sure objectives are clear
Communication, to make sure objectives are understood
Written job descriptions
Regular progress and performance evaluations
Fair hiring practices
Fair wage scales

AS FOR MY OWN PERSONAL/MANAGERIAL SKILLS, I WORK HARD TO:

Develop my problem-solving abilities
Always stay calm
Be objective
Avoid investments in my own ego
Listen to my employees
Plan changes in our course to minimize negative effects
Make decisions promptly
Always get the facts behind problems
Accept my own limitations
Delegate tasks that can be done more efficiently by someone else
Analyze all available options
Develop my reading/study habits
Improve my skills
Consider and evaluate risks
Be positive with customers, employees, associates

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