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A business owner doing calculations and taking notes

Aiming for Success: How to Calculate the Funds You’ll Need to Start a Business

Set Yourself up for Success

No matter how good of an idea you might have for a business, failing to account for all of your expenses in the coming years could result in your company going under before it ever gets off the ground. Exactly what you will have to pay for depends on a number of factors such as local laws and the type of business that you are creating, but there are some common costs that practically every business owner will need to take into consideration. Read on to find out how much does it cost to start a business.

A Look at the Necessities

As a general rule, business owners will want enough working capital to pay all of their most important bills (except inventory purchases) for at least 90 days. This will include bills such as rent, payroll, utilities, and insurance to protect your company's assets. Other necessities for your business might include licenses, permits, a working website, and delivery vehicles. These are the costs that you must be able to cover for at least three months at all times.

An Expanding Business

In the first few years of operation, most business owners will want to revisit their budget at least once or twice a month. As your business begins to expand, you might find yourself with completely new expenses such as a growing payroll, group health insurance, and higher taxes. If all goes well, then you will also be able to expand your operation and begin considering paid advertisements or even a larger office. For those within certain industries such as renewable energy, there could be state and federal grants that will help you expand.

Hidden Costs

No matter how well a business owner plans, they are certainly going to run into some financial roadblocks at some point. Preparing for as many of these roadblocks as possible and keeping an emergency fund will help you stay on your feet during unfortunate circumstances. Some of the expenses that you might not have considered yet include employee training programs, benefits for your employees, office supplies, and specialists such as accountants that will help you manage your money.

A little preparation goes a long way when you are preparing to open your company's doors and take on your first client. One of the most common reasons that small businesses fail in the first few months is underestimating their running costs and finding themselves without working capital when they need it the most.