Starting a small business is a potentially lucrative venture for any new entrepreneur. However, one must remember that at its starting stages, a lot of costs are involved in putting the business up.
Without the regular cash flow that an established business provides, funding can be an intimidating matter for small business owners. When starting, there are research and market analysis costs you have to make space for. You also need to be on the lookout for competitive mortgage rates and find a good office space.
To make sure you are investing your limited financial resources in the right areas for every phase of your business, here is a guide on what to focus on at each stage.
Expenses for the Early Stages of Your Business
These are some of the expenses you must prepare for while setting up your small business.
1. Initial Research
Before launching, you have to have a good grasp of what the competitive landscape looks like and understand the market you will be catering your product or service to. This helps you make a business plan that distinguishes your concept from others.
One of the first questions you should ask is if there is still space in the market to accommodate your business. If it is saturated, then introducing your business may not make much of a difference.
This is also the time to take a look at your competitors in the field. What are their strengths and weaknesses? How do they differentiate themselves, and how do you plan to respond to their strategies?
Do some digging to get to know your market also. Aside from learning about your target market’s preferences, look at the audience in your local area, too. What are the age ranges and income capacities of the target of your business?
The good news is these areas of research do not need to cost you much money, if at all. But developing early versions of your products, the trips to various competitors’ shops, and more will require some spending on your part.
When you have analyzed your market and have a solid business concept, you will need to purchase equipment for your business operations. These are usually one-time purchases that will cause your expenses to go up significantly for that month.
Aside from the machinery you will use, you will also need desks, chairs, and other furniture to use your purchased equipment. In canvassing equipment costs, factor in some of your workplace setup costs, too.
3. Office Space
As you continue building your business and growing your team, you will need an office space that allows everyone to work comfortably. An office space brings its own set of expenses with it, however, so a large chunk of your costs will come from putting this together and maintaining it.
One of the primary concerns is finding a location that works best for your employees and your customers. You also have to weigh the pros and cons to see if purchasing a commercial workspace or renting one is best for you.
For instance, owning your office makes your overhead costs more straightforward than they would be if you were renting. However, renting could be preferable should you need to expand your office space later on. An alternative is working through a coworking space if you need minimal equipment.
Consult an expert on real estate to gain insight into the best thing to do in the current market. You should also speak with your accountant to see how much of your budget you can allot into your office space.
Before formally launching, you need to put together a small, reliable team that you trust to help you establish your business in the market. It is also important that your initial team is flexible because you all will have to juggle several responsibilities when you begin. To make sure you hire trustworthy teammates, you can reconnect with former colleagues and friends and pitch the idea to them.
While you still have limited funding and resources, it is wisest to hire from the top down and then begin hiring more people mid- to entry-level positions as your organization’s capacity grows. You should also look to outsourcing some services early on, such as accountants, web developers, and marketing specialists, while you cannot get people full time.
While you are budgeting for your organization’s initial expenses, consider the kind of culture you are building for the business as a whole, too. Your early company culture will direct how your business will evolve, so be intentional about creating one that encourages the right values.