A new business will always consume more money and produce less revenue than an entrepreneur predicts. That’s why it’s so important to launch with enough money to give your new business time to get on its feet.
A good start-up budget includes generous amounts for expenses and no money from sales. Cover your cash flow needs for the first six months by following these steps:
– Calculate capital costs. Total how much you’ll spend on one-time start-up costs such as equipment, computers, rent deposit, legal fees, marketing materials, vehicles and opening inventory.
– Calculate operating expenses. determine how much money your new business will require to operate for the first six months. Expenses include softer costs such as rent, hydro, telephone, wages, office supplies, advertising, supplier services and your personal draw.
– Total both categories. Your start-up budget includes capital costs plus six months of operating expenses. You should add 10% just in case your numbers change slightly.
– Raise the funds. Your start-up budget is the amount you’ll need to secure from a bank, investors, family, friends or your own pocket. Highlight the startup budget in your business plan so readers know exactly how much money you are seeking.