Calculating Startup Expenses: Your Cash Requirements

In recent years, starting a business becomes more and more popular among young people. Compared with being an employee, starting a business can make you a boss of yourself. You have the autonomy to design and determine your products or service according to your vision. Also, you have the right to decide when you work and how you work.

Building your own business allows you to pursue your goal and dreams with great control and independence. In this process, you'll gain a sense of personal fulfillment as well.

However, there are absolutely some challenges and difficulties, including financial risks, uncertainty, and stress. If you have already made up your mind regardless of the challenges, the following blog will be helpful for you.

In this blog, we'll give you a guide on how to determine your startup costs and how to start your business. Also, we'll introduce some examples of successful startups for you.

5 Steps to determine startup costs

1. Identify your expenses

Firstly, write down the startup costs you've already incurred. And then do some research about the expenses you're likely to come across when you start your business. For instance, you need to prepare the business registration fees. You need to register your business with the state. What's more, you need to pay for business licenses, business equipment, supplies, consultants, payroll, insurance, marketing, taxes, and so on.

2. Estimate the costs

After figuring out what should be paid for, you should note the average cost for each category. For example,  you can check the fees of business registration and licenses with the state government, and ask for a quote from the vendors where you buy your equipment and necessities to estimate the cost.

3. Make a list

After these two steps, you should divide your list into 2 categories, which are one-time expenses and ongoing expenses respectively. So the ongoing can reflect the average of every month. You can multiply the ongoing expenses by the number of months until the launch and add up those one-time expenses. The total will be your estimated startup expenses. For instance, one-time expenses can conclude business registration fees, business licenses, equipment, and ongoing expenses can be payroll, insurance, supplies, marketing, and so on.

4. Extra budget

Even with a plan, the startup is possible to meet difficulties and challenges. It's important to leave some extra budget for special situations. So make sure that you have enough budget to sustain your business for up to 12 months beyond the target launch date.

5. Run the calculations

To assist in creating a pricing structure for your goods and services, take into account both fixed and variable costs. To assist you project when your business will start to turn a profit, include your startup costs in your business plan. Your expense sheet can also be used to determine the available financing choices from banks, investors, and venture capital firms.

How to start your business

1. Do market research

It's crucial for you to do some market research to understand your customers better and more. To better understand the opportunities and restrictions for attracting clients, gather demographic information. Population statistics on wealth, family, interests, and any other information pertinent to your business could be included in this.

2. Plan for your business

A business plan is the foundation of your business. It can guide you through every stage of starting and managing your business. For instance, it can serve as a roadmap for you to know how to structure, run, and grow your business.

3. Fund your business

After planning for your business, you will figure out how much money you need to start your business. If you don't have enough money, you need to raise or borrow the capital. For instance, if you need to get venture capital from investors, firstly, you should find an investor, share your business plan, go through a due diligence review, work out the terms, and then you will get the investment.

4. Choose your business location

The choice of business location is one of the most important choices you need to make. The decisions you make when starting a physical store or an online store could have an impact on your taxes, regulatory requirements, and income.

5. Choose your business structure

Your business structure will affect many things, such as your business registration requirements, how much you pay in taxes, and your personal liability. You're supposed to choose a business structure that offers you the right balance of legal protections and benefits.

6. Choose your business name

Choosing a perfect name for your startup is not an easy thing. On one hand, you should make sure that your business name isn't being used by someone else. On the other hand, the name should reflect the spirit and characteristics of your brand and leave a deep impression on customers.

7. Register your business

Now it's time for you to register your business to make it legal. In most circumstances, you just need to register your business with state and local government, just as simple as registering your business name. But if you need trademark protection or tax-exempt status, you need to register with the federal government.

8. Get federal and state tax IDs

Your employment identification number (EIN) will be required when starting and expanding your firm, as well as when carrying out tasks like opening a bank account and paying taxes. This is your company's equivalent of a social security number. You must obtain a tax ID as well in some states, but not all.

9. Apply for licenses and permits

Keep your company operating efficiently by abiding by the law. Depending on your business's industry, state, location, and other criteria, you may need different licenses and permissions. Most small businesses need a combination of licenses and permits from both federal and state agencies.

10. Open a business bank account

A small company checking account can assist you in managing your daily business, tax, and legal concerns. The good news is that if you have the necessary registrations and paperwork prepared, setting one up is simple. What's more, it also provides benefits and convenience to your customers and employees.

Examples of successful startups

1. Facebook

Facebook, which began as a social media platform with the goal of connecting Harvard students through an online community, is today among the most influential social networks in the world, with 2.7 billion monthly members. At the time, American colleges and universities already had online directories that included images of students along with some information about them. These were referred to as "facebooks" in popular culture. Mark Zuckerberg came up with the idea of creating one just for Harvard students. Finally, due to Zuckerberg and co-founders Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes, "Facebook" was born. While the network gradually adopted a more experienced layout over time, the exclusivity element worked effectively, and the rest is history.

2. Apple

With a market value of over $2 trillion, Apple is probably one of the most valuable tech businesses in the world. In 1976, college dropouts vowed to transform how people perceived computers by making them portable and simple to use. Frequently, it's difficult to imagine that the original Apple computer was created in a modest garage in Cupertino, California, in the United States. A user-friendly computer concept revolutionized Apple. The business also unveiled the first color graphics.

3. Amazon

A website that sells books online wasn't a huge deal back when people could simply go to the nearby bookstore to purchase them. The outcomes, however, were unexpected. It became out that many individuals desired a digital bookstore. Within a month of its start, Amazon had already sold books in 45 different nations in addition to the United States. Jeff Bezos worked toward his goal of having his business dominate eCommerce by selling practically everything slowly and steadily, and look where it is now!

4. Airbnb

Brian Chesky and Joe Gebbia, roommates, and former classmates, had the notion to turn their living room into a bed and breakfast after relocating to San Francisco in October 2007. The former roommate of Chesky's Nathan Blecharczyk joined as the third co-founder and chief technology officer of the new business, which they called AirBed & Breakfast, in February 2008. They created a website that provided short-term housing and breakfast for anyone who couldn't find a hotel in the crowded market. On August 11, 2008, the website airbedandbreakfast.com had its public debut.

5. Instagram

Two guys created an app in just eight weeks, as told in this tale. A Stanford alumnus named Kevin Systrom, who worked on Google's Gmail and corporate development, spent his weekends creating an app called Burbn that allowed location-aware photo and note sharing. Mike Krieger, an early user of Burbn and co-founder of Instagram, was introduced to Kevin in this way. Later, Burbn was rebranded as Instagram and limited to images only.

Conclusion

In our blog, you can have a comprehensive understanding of how to determine your startup expenses, and how to start your own business. Also, we introduce 5 examples of successful businesses for you to know.

Don't hesitate, take the first step bravely, and you will find a new world.