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12 Startup Tips

Essay by   •  July 19, 2012  •  Essay  •  1,077 Words (5 Pages)  •  2,115 Views

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1. Know How Much Capital Will Be Enough

How much capital will be enough? To know this, determine how much capital you need for one year of business operation. In the first year, keep your initial capital separate from your income. The income of your first year should become the capital of your second year of business. When you do this, the only amounts that you will need to finance are your initial capital and possible growths you want to introduce above and beyond the initial model. Start with this simple model and you won't go wrong while determining your startup costs.

2. Make A List Of Cost Centers

The first step is to list out all your cost centers. Include things such as professional fees and payments, technology costs, administrative costs, sales and marketing costs and wages and benefits for employees in your cost center list.

Some of the costs you should include in this list are equipment, space, marketing, networking, wardrobe, transportation, business registration and filing, security taxes and so on. Plan for these costs when you're calculating your initial cash flow requirements, so that you're not surprised by sudden unplanned costs along the way.

3. Create A Startup Checklist

Create a startup checklist to better gauge how much you'll need, as follows:

* Decide on a business name and register it

* Create detailed business and marketing plans

* Set up your banking and professional relationships

* Hire a corporate attorney, tax consultant and an accountant

* Obtain permits and licenses

* Set up pricing catalogues for your offerings

* Determine financial requirements and means of obtaining them

* Retain office space and equipment

* Outline risk management and insurance policies

* Hire suitable employees

4. Use Online Startup Calculators To Evaluate Costs

Use one of the many calculators online and calculate your startup costs based on your requirements. These calculators allow you to estimate the costs against each expense category and tell you how much asset you need to have in the bank before you break-even. Here are a few online startup business calculators:



5. Predict Business Costs By Networking

Check out other entrepreneurs in your business domain and learn to predict your business's costs. For example, if you're opening a cyber café, scan the financial statement of similar companies that have been publicly traded. Even though your revenue numbers will look different, you can get an idea of cost of sales and administrative expenses.

Study trade associations, small business message boards and entrepreneur support groups in related fields to evaluate information for both new and established companies. You could examine statistics or even subscribe to entrepreneur support group magazines, and join entrepreneur forums online to share ideas. Seek out other entrepreneurs who have set up similar businesses, and discuss start-up costs with them, paying special attention to unexpected costs.

6. Project Startup Costs Conservatively

When you calculate start-up costs, you need to allocate a few months of funding to cover expenses before you open for business. Again, once you're open for business, it takes a little time to get your business to sustain itself. Project your costs conservatively by including a substantial cushion for beginning operations. This will ensure that you will have enough funds to set up an office, hire employees, take orders and cover other related costs.

Be realistic when assuming incoming revenue in the early stages.




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