Sara El Kareh
The first thing to do when planning for a business startup is to identify the budget required. Yet, every business differs in its own ways; it needs different amount of money to be established and has different requirements regarding the phases of growth. Therefore, there is no plan that unifies all the costs of the startup of all businesses. Small businesses require fewer costs than bigger ones which budget includes more equipments and investments. And of course, you should not forget the location or the place you want to purchase or acquire, which might need renovation or redecoration.
First of all, you should be able to estimate how much seed money you need by identifying the costs required for the business in the first few months. A part of these costs is a one-time required amount, such as the price of purchasing a building; while the other part will be permanent since you have to buy new utilities and equipments from time to time, or pay for the insurance…
After estimating the costs, put them under two categories: essential and optional. However, a reasonable way to start a business is to have only the essential costs, which also can be separated into two other categories: fixed (costs of rent, maintenance, insurance, tools…) and variable (expenses related to the product or service sales, shipping, packaging, inventory…). The best way to estimate your startup expenses is to set a worksheet that includes all type of costs.
Then you move to the second step: carefully evaluating your current financial status, prior to searching for assistance in that regard. Refer to the following questions that will help you identify the financial requirements of your business:
- Are you in need for more funds or your capital is enough for the startup?
- If you find yourself in need for more working capital, what type of requirements are you expecting to get?
- Are these needs for growing the business, or are they a support in case of emergency?
- Are your needs urgent? In this case, you must be able to anticipate them instead of searching for capital under pressure. When your business is having issues, it is not easy to have a loan approval, so you must pre-plan and pre-assign some money for such critical situations.
- Are you facing high risks? No business is risks-free, but the level of these risks influences the loan expenses and the existing financial options.
- Where is your business on the scale of growth? Starting up a business and expanding it are considered as a transitional phase, when needs are the most important things.