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One of the challenges of planning
and getting a new business off the ground is to establish what your start up
costs are going to be. At best, it's going to be a stab in the dark or a
wild guess, but there are some specific steps you can take to make your costings more realistic.
Why Estimate Your Costs?
But, before
we look at where you can get help, we should consider why you need to get
your estimate of start up costs to be as close to reality as possible.
Firstly, if you are seeking bank finance the dreaded Business Plan is
required! The Bank Manager is not going to be impressed by a comment such
as, "I think my start up costs are going to be around £10,000 but hey, who
knows!"
Secondly, you need to go into any new venture with your eyes open. You have
to be as sure as you can on how much it's going to cost to get your new
business started. There is nothing worse than getting 90% of the way there,
only to fall at the last hurdle because you didn't cater for one major
expense.
Lastly, as a
start up you are likely to only have a limited pot of money available. You
have to prioritise which costs are essential and which can be delayed until
the business is more established. You can only do this if you have
researched and understand what your costs are going to be.
Where Can You Go For Help?
It's easy to
think that you have a good idea of what your start up costs are likely to
be, but do you really? Once you think about it, a whole can of worms starts
to open! But there are sources of help you can turn to, which will ensure
that you don't face oblivion within the first few weeks.
Your Local Business Link
A good
starting point is your local Business Link office (Business Connect in
Wales, Scotish Enterprise, and Invest Northern Ireland). Check out
www.businesslink.gov.uk to find out where your local office is.
Call and book
an appointment to see an advisor. They will have a wide range of material
and experience which will give you a good grounding in the costs you will
have to cover. The service is free, so that's one cost you won't have to
worry about!
Chamber of Commerce or Local Business Club/Group
If you have a
local arm of the Chamber of Commerce or any formal or informal business
group, then they are a good source of knowledge and information. Within the
group you will find a wealth of experience and people who have been through
it all – good times and bad times! You may be lucky enough to attend a
meeting when a speaker is there on just the topic you are looking for.
Colleagues and Other Business Owners
If you don't
have a club or group you can attend, then seek out business people yourself.
Ask all your contacts to tell you about their start up experiences. What
costs they budgeted for; what costs they didn't budget for; where they
overspent. Genuine business people are usually happy to share their
experiences and give you advice. Listen to what they have to say and take
note.
If you don't
have a circle of business contacts, put the word out to all your personal
friends. A few of them will have friends or relatives who are in business on
their own. Ask for an introduction or referral. This will warm them up
before you ask your searching questions.
Bank Business Guides
Many Banks
provide comprehensive brochures on starting up in business. They usually
contain a Business Plan template which will include a section on start up
costs. Some go further and produce guides for specific industries and
sectors. They provide in depth analysis about the business, the market, the
competition and estimated start up costs. Call in to the local Branch of the
one of the larger High Street Banks and ask to see the Small Business
Manager/Advisor.
Suppliers
If you are
looking to cost your raw materials or partly finished stock for buy in
then, as a key part of your financing, call your
potential suppliers and ask for quotations. Tell them that you are starting
up and they should be more than helpful, after all you could be a potential
customer!
Examples of Start Up Costs
If you
haven't got the time to try any of the above (and there's no reason why you
shouldn't find some time!) here are some of the key costs you will
have to cover:
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Equipment
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Fixtures and fittings
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Installation
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Initial stock
-
Advertising
-
Decoration
-
Legal and other professional
fees
-
Licenses
-
Specialised computer software
-
Up front rental payment
-
Initial cash float
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Cash to cover trading for the
first month or two until the payments start rolling in
The list is
by no means exhaustive but it will provide you with the first step to
finding out how much it will cost you to start up.
Who Said It Was Going To Be
Easy?
Getting a new
business off the ground is difficult enough, even if you fully understand
what it's going to cost you. Doing it with no idea is not a recipe for
success. Devote some time to this exercise and you will be amply rewarded.
Robert Warlow
© Small Business Success
http://www.smallbusinesssuccess.biz
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