How much is it going to cost you to start the business you’ve dreamed of? The truth is that no business is the same and many small businesses can get started for as little as $3,000 or less. These companies are often home-based with low upfront investments. While your average Main Street franchise may require a larger investment, home-based franchises can be started with as little as $1,000-$5,000. It’s important to understand the costs specific to your venture, regardless of its size. Getting the number right will help you determine what financing you may need, and what it will take to start making a profit. Here are some simple tips for calculating your start-up costs.
Start-up costs are defined as the costs you’ll incur before you start making any income. It’s important because it will impact your tax return. The costs involved in preparing to open a business and may include things like market research, researching locations, advertising, training, wages, and any fees paid to professionals or consultants, are your expenses. You can deduct many of these expenses after you start your business, but if you decide not to open a business after doing all your research, the deductions go away. You’ll also incur one-time costs to purchase assets such as inventory, property, vehicles, etc. These are your capital expenditures and are written off through depreciation.
Your assets are the money and equipment you have saved to help start your business. You’ll need this to support your business in its start-up phase and pay off necessary business and personal expenses such as payroll, rent, utilities, etc. until the business is self-sustaining. Creating a list of the start-up expenses and capital expenditures that you expect to incur, alongside the assets that you have, can help you keep track of things and know how close you are getting to your finish line.
And remember, talk to other business owners and get a realistic appraisal of what the true and manageable costs might be. It’s not something you have to do alone, either. Small business resources like your local Small Business Development Center and the Veteran’s Business Center can all help.