Determining Your Starting Costs
Business Calculators > Starting Costs > About Starting Costs
If you're thinking about starting your own business, any type of business, there will be expenses that you will need to cover before you open your doors, launch your website, or sell your first product or service. The timing of starting expenses is what distinguishes them from ongoing expenses that you track each month in the course of doing business.
As part of your estimates for starting costs, you will also want to plan for a cash reserve to cover the actual costs of doing business during the first few months, until your sales are sufficient to cover your operating costs.
Types of starting costs:
Expenses
How do you know what your starting expenses will be? This will vary depending on the type of business. If you're planning to have a website, you may incur site development costs ahead of opening the business. If you're planning to have a traditional storefront, there may be initial lease costs or deposits that must be paid for up front. Common starting costs would be:
- Legal
- Stationery/business cards
- Product or service description brochures
- Lease deposit
- Consulting
- Insurance
- Expensed computer equipment **
**In the United States a computer purchase can be treated either as an asset or as an expense, depending on conditions set forth in federal tax law. When you can choose, you normally want to expense your purchases because then you can deduct those expenses from income.
Cash reserve
In addition to the expenses that must be paid before your business is up and running, you also want to estimate the amount of cash you need to have in your account to support the company during the early months, before sales reach a break-even point.
Starting assets
Starting assets might be inventory, vehicles, buildings and equipment that can be depreciated over time.
Starting costs example:
Here's an example of a listing of starting expenses, cash reserve and assets:
The total requirements shows how much money is needed to cover starting costs.
How to use the Starting Costs Calculator
The Starting Costs Calculator lets you estimate total starting expenses, cash reserves and assets to be purchased. It then automatically calculates your Total Requirements.
- Initial expenses:
- Click on the Edit button for Initial Expenses; this displays a listing of sample expenses
- Double click within each expense cell and type in the expense amount (use whole numbers, without punctuation)
- Click on the Done button to transfer the combined total for Initial Expenses
- Money in the bank as reserve for losses:
- Click on the Edit button for Money in the bank; this displays a listing of expenses that you will incur in the first few months you are in business
- Double click within each expense cell and type in the estimate amount (use whole numbers, without punctuation)
- To adjust the number of months for your reserve, click and drag the circle on the sliding bar to adjust up or down between 1 and 12 months. Your total reserve will adjust depending on how many months you select
- Start-up inventory, other current assets, long-term or fixed assets:
- Double click on each cell and enter your estimated total (there is no additional breakdown of assets)
The calculator will determine your total startup requirements. Repeat the procedures above to adjust any of your estimated expenses.
HOW-TO RESOURCES
Starting costs video
Learn more about determining your cost requirements for starting a new business.