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New entrepreneurs are a hearty, impressive group of people. Typically full of enthusiasm, optimism, and a willingness to do whatever it takes, they will jump into their new adventure sure of many things, unsure of a few others, and sometimes with an unwillingness to admit the difference.


And while that can-do attitude is great to have when you leave a job and start a new business, some things simply cannot be overcome by sheer force of will, and one of those things is the nitty-gritty analysis needed to figure out just how much it is going to cost to get your new venture up and running.


This info is critical to know because:

  • It will establish how much money you need to raise before you get started
  • It will help you figure out a budget and timeline for getting to profitability




So, just what are those startup costs actually going to entail? They can roughly be broken down into two broad categories: Assets and Expenses. Let’s look at each:


1. Assets: You need to make a list of what you will need to buy to launch this business, and then estimate (to the best of your ability) what each one of these assets will cost. For example, if you are going to start a nail salon, you will need to account for the cost to build the stations, purchase the nail polish and other inventory, the cost for signage, and so on.


Assets businesses might find on this list include:


  • Computers and printers
  • Displays
  • Office supplies
  • Desks, chairs, filing cabinets, office furniture
  • Product packaging


Click here to read more articles from small business expert Steve Strauss


2. Expenses: There are two types of expenses to account for when you start a business – one-time startup expenses and ongoing expenses. For this analysis of startup costs, they need to be treated differently:


One-time expenses:


  • Legal and accounting expenses
  • Licenses and permits
  • Website creation
  • Remodeling / decorating
  • Deposits


Ongoing expenses:


  • Marketing, advertising, and related materials
  • Rent
  • Taxes
  • Insurance
  • Debt repayment
  • Utilities, Internet, phone
  • Wages
  • Salary of owner
  • Supplies


Once you have all of these numbers, the real trick is figuring out how to put them together in such a way that you really know what it is going to cost to get started.


The first few categories are pretty straightforward. Simply come up with a grand total for the assets you need to buy, as well as for your one time-expenses. For the sake of argument, let’s say that assets will run you $10,000, and that your one-time expenses are $10,000 too -- $20,000 total.


The real trick is that last category – ongoing expenses. A good rule of thumb is that it will take you at least six months after you begin your venture to start turning a profit. Of course, it could be more or less, but that’s a good figure to play with as that is how long it may take to market and advertise your business, get some customers, generate income, and get paid.


As such, you need to estimate what your ongoing expenses will run you for the first six months. Let’s say that it will cost $5,000 a month to run your business. That means that your startup expenses will break down like this:


Purchase of assets:                     $10,000

One-time expenses:                    $10,000

Six months ongoing expenses:  $30,000


Total:                                              $50,000


$50,000 is how much money you will need to open the business, outfit it, and have enough money in reserve to pay yourself and keep the doors open until you turn a profit roughly six months later.


Word of warning: Don’t underestimate these numbers. One of the worst things you can do is start a business and run into a cash crunch a couple of months down the road because your forecast was too rosy. Be conservative.

About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

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Biz_Debt_body.jpgby Iris Dorbian.

According to statistics compiled by the Small Business Administration, about half of small businesses close within five years. Of the reasons cited, insufficient cash flow and debt are among those commonly listed. Clearly, for small business owners struggling to survive and stay financially afloat, getting rid of debt should be a top priority.

But the question is how? Although the economy has been gaining considerable momentum since the dark days of the recession, there are still many business owners who are suffering the aftereffects of having taken out loans during that period to pay their bills or increase their cash flow.

The following are five suggestions courtesy of, an Orlando, Florida-based site that offers people information on relieving debt. These takeaways should help small business owners eliminate or significantly reduce their financial burdens. 

1. Do a monthly budget

This will help you calculate just how much money you need for your business and how much can be earmarked for paying off your debts.

2. Cut costs

Sometimes just trimming excess expenses from an operating budget is enough to get a business through troubled times. Are there membership fees to groups and organizations that you no longer need? Cancel them so the money isn’t coming out of your account every month or quarter. If there is equipment that your business no longer uses consider selling it. If you do need it down the line, it might be more cost efficient to lease or rent it.

Biz_Debt_PQ.jpg3. Speak to creditors and/or vendors

If you owe them considerable money for past services rendered, try to speak to them about arranging to increase your credit line, reduce monthly interest rates, or restructure your repayment options.

4. Consolidate loans

Dealing with one creditor rather than several can lighten your financial burden and save time. Research loan consolidation companies that can help you navigate the process without tacking on additional fees.

5. Offer marked down items to customers

Not only can this elevate your profile within your community and attract customers, both new and regular, to your business (you can promote a big sale or discount at your store through print/digital media as well as word of mouth), but it might be a good way of generating extra income that can allow you to stay on top of bills.

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