Starting a business ground up is such an exciting venture but expensive. To embark on this journey successfully, careful planning of your finances is crucial.
However, the cost of a business varies depending on the type of business you want to launch, the workspace that will suit your business, legal fees, license and permit fees, payroll, and other operational expenses.
Although it is important to have business capital before starting a business, you can register your business today with even the little savings you have and kick-start your entrepreneurship journey.
But coming up with an estimated budget before starting a business will help you ensure you do not run out of funds in the long run.
When planning for startup costs, do not underestimate the expenses since your business might grow or be hit with unexpected costs which can result in profit losses forcing you to readjust your targets.
Before you come up with your startup budget, ask yourself some questions that will direct what to include in your budget such as:
1. What type of business setup do you want?
2. What are your must-haves for your business?
3. What can you contribute to your business?
4. What can you get from friends and families?
5. What can you do without?
Let’s explore ways you can plan for your startup costs.
Start small
Every entrepreneur has high expectations of their company, however, having an open mindset to start small will save you a lot of time and money. Every successful business did not start big.
To test your business idea, it is better to start small to understand your potential, and in case it fails or meets difficulties, you will not lose a lot of money and it will be easy for you to make a comeback.
With as little as your savings, you can register your business and purchase a virtual office, which will offer your business flexibility and scalability when working either at your home or in a coworking space.
Once your business starts growing, you can invest money in your business for its expansion.
Understand your startup expenses
Your startup expenses will include costs on the things needed before you start business operations, ongoing costs, and asset costs. The startup costs you ought to look out for when planning your budget include;
· Business registration
· Licenses and permits
· Office rent/ lease
· Legal fees
· Supplies
· IT or basic technology
· Labor
· Insurance
· Marketing and advertising
· Website costs
· Payroll
Ongoing costs to look out for include utility bills, payroll, and any money that will have to be paid off monthly.
Ongoing costs will disrupt your monthly cash flow so it is important to always make up for it. The assets costs include;
· Vehicles for business operation
· Operation costs till the business is profitable
· Trademarks, patents, copyright
· Office improvement
· Technology equipment
Knowing your initial costs will make it smooth to launch your business successfully until you are profitable enough to adjust your budget and avoid unnecessary risks.
Financial planning
A financial plan will help you manage your current financial needs so as to reach a long-term financial goal. You can do research on similar businesses in your industry to get an idea of typical expenses.
You can invest in a mentor who will help by giving advice and guidance you need to run and operate a successful business. You can also talk to vendors and suppliers to gather cost data to organize your expenses.
Set milestones and objectives for your business. Setting a milestone will help in developing strategies to achieve them, and monitor progress which will help you create a clear path towards financial success.
Additionally, project your monthly sales. This might be the difficult thing to do since you don’t have a track record on which to base your estimate. To come up with a monthly sale, you will have to be optimistic and estimate your best scenario sales, least sales, and somewhere in between.
Depending on the type of business you want to venture into, you can assume that you will not sell everything.
Create a cash flow statement
A cash flow statement is a statement that shows changes in balance sheet accounts, the inflows, and outflows of cash in your business.
You can come up with a business cash flow statement for at least the first three months. You can do this by adding your fixed costs, estimated costs of goods, revenue of your best sales and worst sales, expenses, loan payments, investments, and capital contributions.
A net cash flow can be added by adding operating, investing, and financing activities. Compare the beginning cash balance with the final cash balance to determine the net change in cash position.
For a healthy startup cash flow management, avoid tying up excessive cash by reducing inventory, collecting receivables before payable due dates, and improving cash flow by making strategic investments.
Figure out your financing methods
Now that you have a financial plan and a cash flow statement, you should determine where you are going to get funds to launch your business smoothly. There are various ways you can get funds such as; personal savings, bank loans, investors, government grants, or support or being lent money by friends and families.
Banks and financial providers offer small business loans that help in launching your business. If you do not want to lend money, some investors are willing to invest in startups as long as they have a well-documented business plan and can pitch their way to get an investment. Investors invest in companies and not people.
How much will it cost to start a small business in the UK? As you have seen above, the cost of starting your business depends on various factors. Having a well-prepared budget will help you understand your business’s financial health making it easy to manage growth and make informed decisions. Come up with a well-informed budget and register your business today.
Icon offices offer the best company formation service in the UK to both UK and non-UK residents at an affordable price. To register your company simply click here and let us help you get started.