One of the most challenging aspects of starting a business – and often one of the biggest obstacles – is that of cost. At some point in the process of putting a plan together, every entrepreneur has to ask themselves what it’ll run them to get things off the ground, and sometimes it can be difficult and overwhelming to get a good idea of the expenses they’ll be facing as their own boss.
There’s no easy answer to this, of course. How much it’ll cost to start a business depends entirely on the business itself, as well as several other factors that make impossible to give a general ballpark estimate for every entrepreneur. There are, however, elements that one can look at and actions one can take to get a decent look at what the operating costs of a new business might be.
The Small Business BC Blog recently published an article on this subject, entitled How Much Will It Cost? Projecting Expenses for Your Startup. It offers some tips that entrepreneurs can utilize in order to get a more accurate look at the expenses they’ll be facing when they get their start.
Here’s a snippet from the article:
Know Your Direct Costs
First things first: figure out the difference between a direct cost and an indirect cost. Your direct costs (also called COGS, or Costs of Goods Sold) are things you have to pay for only when you sell a product or a service. For example, a bakery’s direct costs are ingredients and packaging. A marketing company’s direct costs might include subcontractors like copywriters or designers.
As I mentioned above, how much it’ll cost to start a business depends entirely on the business itself. Direct costs are just one example of this, but you can bank on them being different for every entrepreneur. Figuring out what they are and breaking them down will be a big step in getting a more accurate projection of what your costs will be.
The article also covers the topics of creating an operating budget, which involves indirect costs, and creating a tracking system to keep an eye on your overall expenses. It’s a good read that offers some perspective on a topic that many entrepreneurs may feel a little overwhelmed by, and we’d say to give it a look if you’ve got on an eye on becoming your own boss and want a little more perspective on costs.
What did you think? Did you find this article useful? Do you plan on taking its advice? Have you started a business and taken a similar approach? Your thoughts are always welcome, so let us know!