Determining Your Start Up Capital

Estimating start-up capital for a business should be done strategically. Every year, thousands of businesses go under because of the failure to determine at the outset how much it costs to run a company effectively. In today’s economy, it is more important than ever to know the green required to be successful. Read more to determine how best to estimate the start-up capital your business will require.

Step 1

Learn the industry. Collect resources from the library, online and local business centers to gain information about what is needed to operate the chosen business. Keep in mind that legal and accounting fees may vary, and so you should contact several law firms and accounting offices to learn how much per month will be required to handle potential payroll and legal agreements. According to D&B, “In order to determine how much seed money you will need, you must estimate the costs of your business for at least the first several months.”

Step 2

Determine how to cut costs early in the business operation. Equipment can often be leased instead of purchased, which could be cheaper depending on the use. Also, check prices from different sellers and take the average of the costs to establish an accurate expense calculation. However, if there is only one option, always round up it to the nearest whole number. This will help ensure that there will be enough money.

Step 3

Build relationships within the industry to learn what others pay. Obtain deals in writing, because they may be used as quotes for accurate expense calculations. Collecting quotes for all professional and major purchases will be necessary because you might not be able to find estimates online for your specific industry. Going to the primary source is always best when starting a new business for the most accurate costs of operation.

Step 4

Include any potential taxes and miscellaneous fees to ensure that nothing is left off the spreadsheet. These numbers will have to be estimated based on the current tax year based on IRS forms found within the IRS.Gov website. Local and state taxes may be found on most county websites in the business section. As for the spreadsheet, look for templates online from reliable sources, such as the Service Corps of Retired Executives (SCORE), which offers free or inexpensive guidance to business owners all over the country. Asking for historical advice from more experienced entrepreneurs may be very useful for professional fee calculations and some tax estimations.