So you have an idea for a business, and you’re wondering how much is this going to cost to set up? It’s true that the costs for every business are going to be very different. Even so, there’s a very scientific method to figure out how much does it cost to launch a startup.
There are startup cost calculators available to give you the answer directly, but I’m going to share the secret formula with you so that you understand what the costs are. It will help you learn all the costs associated with launching a startup, and that in turn will help you reduce the costs.
The startup costs are basically divided into two categories – one-time costs and recurring or operational costs. Let’s look at each one separately, so that you know how to calculate the costs for your own startup.
The startup costs are basically divided into two categories – one-time costs and recurring or operational costs. Let’s look at each one separately, so that you know how to calculate the costs for your own startup.
One-Time Startup Costs
One-Time Startup Costs
First of all, let’s list all the things you have to do. Then we’ll look at the formula for adding up the costs.
- Registering a Business
- Office Space (Deposit)
- Bank a/c
- Furnishing cost
- Equipment (includes machinery, equipment, hardware, and software)
- Lighting and fixtures
- Signage
- Domain name and hosting for a website
- Web design and development
- Trademark, patent and other IP protections
- Create a Business Plan
- Other legal services
You can add any other one-time costs that your startup is going to incur on top of all this. Now you have to figure out the actual amounts required for all these one-time startup launch activities.
First of all, open up a spread sheet and list all these activities on it in a single column. Now call the regulatory body where you register your business, or visit their site if it can be done online. You’ll find the amount required for business registration. Put it in against the first row in the second column, next to ‘registering a business.’
Now let’s move to the office space. Decide the location where you want to launch your startup, and then find the best office space provider in that area. Call them or visit their site to find out how much an office of the size you want will cost. Put down that cost against the second row in the second column. And so on…
Now, at this point, I’d like to mention that you can probably save on a lot of these startup launch costs if you choose the right office space. For instance, if you go for a serviced office space in a business centre, you don’t have to pay any deposit. Nor do you have to pay for furnishing, lighting, fixtures, networking, cabling, and all the other startup launch costs involved in setting up an office.
You simply walk in, pay rent based on your preferred option (weekly, monthly, etc.) and pay the rent for it. There are no other costs. Speaking of other costs, let’s move on to the operational costs for which you need to set aside enough reserve capital.
Operational Costs to Plan For While Launching a Startup
These are the recurring costs that you will have to plan for while running the business. Note that even in recurring costs, you have two types – fixed and variable costs.
Fixed costs include all your known monthly bills such as rent, salaries (if any), consulting charges, maintenance changes, etc. You may also need to pay for debt servicing if you have raised funding in the form of business loans.
Variable operational costs are those that are connected to your activities and sales. More activities mean more spending on things such as office supplies and other things needed on a daily basis. More sales mean more inventory and/or raw material and labour for manufacturing the product. It also means higher electricity bills and other utilities.
I think now you get the picture of how to calculate your startup costs. Your spreadsheet now includes the one-time startup launch costs, the recurring fixed costs, and the recurring variable costs.
Some things – such as the per unit production cost price, is something that you will have to calculate on your own depending on how much resources (material, labour, utilities, overheads, etc.) go into making it.
But work on it. Put down all the cost items on the spreadsheet, and then find out how much each one is going to cost you. Add it all up, and you will know how much does it cost to launch a startup.
