What to Consider in Opening Your Small Business
There are as many reasons to open your own small business as there are entrepreneurs who have done so. Many people chose to go it on their own because they feel like owning your own business puts them in charge of their destiny. Some people simply do not like having to answer to a boss. Others just like the independence and freedom entrepreneurship can offer. Whatever reasons you are considering for striking out on your own, congratulations on taking the first steps to making it a reality.
What Expenses Should You Consider As Start-up Cost
One of the early steps in planning your new venture is to determine how much money you need to get started. Start-up capital is required for many reasons. Most small businesses will need some equipment and or inventory and maybe it will be necessary to take the business equipment loan. Office or retail space can be another start-up expense to consider along with the associated utilities, deposits, and expenses for furniture, fixtures, and even decoration.
Promotional expenses should start before you are ready to sign your first customer. Potential customers should know about you and your products or services before you open the doors. Advertising, website development, social media campaigns, letterhead, business cards, and flyers are all things that need to be budgeted into your start-up expenses.
Employee costs include payroll, payroll taxes, and possibly benefits. Depending on your business, you may be paying these costs before you make your first sale. Even the best employees will require time being trained in the way you want them to service customers or build your products. Hiring cheap is a recipe for disaster. Pay people what they are worth and give them the benefits they deserve, a little more if you can, and you will be rewarded with loyalty and respect for both you and your clients.
Working capital is an accounting term that means the amount of money you have to meet on-going expenses. Generally, most businesses need a minimum of three months of working capital, with six months or more being preferred. When starting a business, working capital should be considered as part of your start-up cost and should be in the bank account ready to pay bills.
Few businesses are profitable or even have positive cash flow from the outset. Bear in mind that as the owner, you probably will not draw a paycheck for several months. Your personal financial commitments have to be considered so you can pay your mortgage, make you car payment, and continue to put food on your table.