Before Starting a Business...do this first...
Calculate your startup costs
How does a business start? If we break it down all the way back to where the idea formed, a business is formed based around a problem that we want to solve.
Maybe you are scrolling through instagram and you see there is a cat cafe in a town in another state. This cafe has cats that will come and cuddle with you while you drink your coffee. It also allows you to adopt a cat if you fall in love with one. You think to yourself, “Wow! My town would love something like this!” An idea is formed. You do your market research and write your business plan. Now you need funding to make it happen.
Identify your costs before you even launch
A great tactic to identify your costs is to reverse engineer your business. This means, start at the finish line and work your way backwards. Imagine that your business is open and running. Using the cat cafe case study as an example of costs:
Brick and mortar building
Initial inventory (coffee, snacks, cat food, products to care for the animals, cats, etc.)
Registering your business with your city and state (incorporating or creating an LLC)
Purchasing appropriate licenses with the health department
Hiring employees
Marketing
Equipment
Office supplies
Lawyer
Accountant
These are just a few examples of costs that will come up when you open a business. In order to know how much money you need, it’s important to imagine every cost it will take to open your doors and continue to operate. Then research what the price will be for each of these items. Once you have established a strong estimate, next you can begin to plan where you will get these funds.
Estimate your profits
A great way to establish if your business is even feasible is estimate your profits. If you have done your market research, you should know:
how much you can charge for your products or service in your community/target market,
how much rent or owning your space will cost,
how many people are in your target market vs. how many you need to spend money on your business.
If you price your products too high the profit margin might be better but your target market might not be able to afford it. While doing your market research on whether your business is viable, if you find that there aren’t enough people in your target market to be able to sustain expenses then that is how you know your business won’t work.
Start up Expenses
How much will it cost to launch your business and how much will your monthly costs be? Fill out the startup cost template to get a good base on how much it will cost to open your doors.
Start up funds
Starting a brick and mortar business is expensive. Not many of us have a pile of cash lying around. The next step is to identify ways to get the funds you need.
Business loans
Investors
Grants
Saving money
The likelihood is that you will probably use more than one of these strategies to achieve what you need to start your business.
Action Steps
Once you have done your market research, written up a business plan, and calculated your costs of opening and sustaining your business; it’s time to get your funding.