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Costs in New Businesses


Many new businesses fail because they don't properly budget for the startup costs. Every new business has startup costs unique to that specific business.


In the US, most costs are about $3K – 4K, according to the U.S. Small Business Administration, while most home-based franchises cost are around $2K to $5K. One good rule of thumb for budding entrepreneurs is to make sure that they must have at least 6 months of start-up costs on hand.


Prospective startup owners should plan in detail before they start a small business. The best approach for them is to test their ideas in a small and inexpensive way. This gives a good indication of whether the potential customers want this product and how much they're willing to pay for it.


Here is a list that is common for all start-ups. New business owners must ensure to add other expenses that are unique to their businesses:


o Office space


o Equipment and supplies


o Communications


o Utilities


o Insurance


o Lawyer and accountant


o Inventory


o Employee salaries including those for the founders/owners


o Advertising and marketing


o Market research


o Printed marketing materials


o Making a website


In net, startup costs are expenses that should be thought of in detail. I strongly recommend that the budding entrepreneurs must be generous and overbudgeting for them. Because in every business, there will be unexpected/unforeseen costs. Underestimating these will falsely increase profit projections.


Let us keep in mind that starting a new business takes more than a name or a brand. It requires careful budgeting and a flawless financial plan. Miscalculating funding is the main reason many businesses fail.

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