5 best Steps to Calculate your Startup Costs

calculate your startup costs

What is the first thing which you do before shopping? Do you shop according to your choices or according to your budget? That’s right, according to your budget and that’s how you should plan for your start-up. All the necessary costs and expenses to be made should be calculated beforehand to ensure that things run smoothly and professionally.  Let us have a look at some of the ways to calculate your startup costs.

Determine your expenses 

You can start by estimating your expenses about some common and mandatory formalities. This can include your permits and licenses, the expense required to incorporate your company. The machines or the resources required to develop the machinery or technique that would help to create your product at a minimized cost. Such expenses can be easily calculated by carrying out a small exercise of estimating average costs for each of them. These expenses can be determined as a one-hit-ko or one-time expenses for your start-ups

calculate your startup costs

Product Processing and Personnel 

The designing or the processing of your product is one of the major expenses for your start-up and hence it would be credible if the cost is estimated beforehand. As the product designing process determines the uniqueness of your product, it should be considered as an important step. Next, would be to calculate the estimated cost for the salaries of your staff members, the people you hire. This cost would not be considered as a one-time expense as it would be categorized as an ongoing expense, at least for a year. Hence, you should estimate your costs accordingly and add the number. 

Also Read:

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Recurring costs   

What are Recurring costs? Recurring costs are the expenses that you incur again and again. A few examples would be the electric bills, office rents, raw material costs, the salaries of your staff, legal taxes, and legal services’ payments, etc. Such costs would have to be covered, irrespective of your sales or your results. In some cases, these expenses have to be covered even if you are not making any profit in the first year of your start-up, so, it has to be noted accordingly and considered equally important. 

Marketing Costs 

Marketing is the backbone of your start-up. As you are a new player in the game, no customer would know about you or your product. It is your marketing campaign that makes it possible for you to survive in the game as a new entrepreneur and overcome your competitors. Marketing costs usually depend upon your plans, your vision regarding your start-up. Some marketing campaigns are quite big and hence require a lot of investment, so it has to be calculated accordingly.  

Other Expenses 

You cannot cover all the expenses which are to be incurred in the future, such as, risk or failures, since they are unforeseen. However, here are another few expenses which are worth noting and to be considered for. Such as, the equipment required for your offices, any special equipment or asset required for your start-up. In case your product is to be supplied in huge quantities, then you need to also consider about warehouses for storage purposes. These are the major ones that you should include in your list. 

What’s the best method to Calculate?

 All of the above expenses can only give you estimates and a rough figure. However, the question is, what is the best way to calculate? Of course, it is accounting. You can use the most adopted method used, which is by traditional means. You can name all your expenses, one by one, and just mention about their estimates on the other side of the respective expenses, add them all up, realise your assets and get a number or the total cost for your start-up. It would also be advisable to add or mention the sources and the total funding which you are acquiring from those sources.

 Conclusion 

Once you have figured out all the expenses which you may incur for your start-up, it is very easy to estimate their rough values or the cost, number them, add them up by using one of the most common methods, mentioned above, and it becomes feasible to put your plan in motion. It is true, that you may not cover all of your expenses, but even an estimated figure would be good enough to aid you for your venture.

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