You may have almost completed your business plan. There are only two steps left! Did you miss last week? Check it out here. This week we are teaching you how to weigh the costs of your business. How much will it be to start your business, how much to keep it running, and is it really worth it? Just because you have an amazing idea doesn’t mean it will be instantly profitable. You should know the amount of time it will take for you to turn a profit so that you know the cost of starting your own business. Let’s figure it out together…
How Much Money Do You Need To Start Your Business?
Take out a pen and paper and let’s start jotting down all that is needed to get your business off the ground. Does your business require office space or a storefront? How much is that? What equipment is needed to run the business? What I am asking in this section is: How much money would you need from loans and investments just to get the elements you need to start your business.
How Much Money Is Required To Get The Business Running?
You will have employees, so how much will you pay them? There is a need for emergency cash, insurance costs, accountant fees, legal fees, software, equipment, etc. Write the costs out per month. Be sure to include the costs of your marketing budget, and note that some months will be more expensive than others. For example, your utilities may be higher in the summer and winter months because of your air conditioning and heating costs. Likewise, your marketing budget may be more expensive in the summer than the winter if you run an ice cream parlour. Really take the time to write the expenses that you will have on a month by month basis.
Don’t be overwhelmed. If you face the real costs now, you will have a more realistic approach to your business and a better chance of staying in business.
How Much Do You Have To Sell Per Month To Stay In Business?
Now that you have a list of all your costs, determine how much product you need to sell to break even each month. For example, if your operating costs are $50 per month and you sell specialty ice cream cones for $5, you will need to sell 10 specialty ice cream cones per month. Apply that to your business.
Take a realistic look at that number. Is it feasible? Can you easily break even? Be honest, because the goal is not to break even. The goal is to make wwwaayyy more profit than you have expenses. If it is feasible, good for you. If not, don’t give up that easily. What can you do to lessen your costs? Maybe it is possible to not move in your office space for the first 7 months. Maybe you will have one less employee for the first year? Do you have a friend who could handle your legal fees pro bono? Get creative, but stay realistic when cutting down on your expenses.
Think to yourself, how long will I have to cut down before I can run business as I wish? Factor that into your decision making as well.
Once you cut your costs, are you able to make a profit?
Will The Profit Be Worth The Effort?
Now that you laid it all out and saw the costs of running your business in terms of dollars and cents, add in the cost of late nights working, employee betrayal, theft, frustrations, success, achievement, and victory, and see if it is still worth it. Is it? We hope it is!
Put all of your costs into a spreadsheet so that someone completely unfamiliar with your business would be able to understand. Next week is the week we put it all together, and we will even give some tips on finding sources of money to get the business off the ground! We hope the “How To Write A Business Plan” series has been of benefit!