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Posted by: Indhu Pavul on 04/23/2017

How Much Does it Cost to Launch a Startup?

How Much Does it Cost to Launch a Startup?

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 is 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.

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

  • OfficeSpace (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 IPprotections

  • 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 spreadsheet and list all these activities on it in a single column. Now call the regulatory body where you register your business, or visit their siteif it can be done online. You’ll find the amount required forbusiness registration.  Put it in against the first row in the secondcolumn, next to ‘registering a business.’

Now let’s move to the office space.Decide the location where you want to launch your startup, and thenfind the best office space provider in that area. Call them or visittheir site to find out how much an office of the size you want willcost. Put down that cost against the second row in the second column.And so on…

Now, at this point, I’d like tomention that you can probably save on a lot of these startup launchcosts if you choose the right office space. For instance, if you gofor a serviced office space in a business center, you don’t have topay any deposit. Nor do you have to pay for furnishing, lighting, fixtures, networking, cabling, and all the other startup launch costsinvolved in setting up an office.

You simply walk in, pay rent based onyour preferred option (weekly, monthly, etc.) and pay the rent forit. There are no other costs. Speaking of other costs, let’s moveon to the operational costs for which you need to set aside enoughreserve capital.

Operational Costs to Plan For While Launching aStartup

These are the recurring costs that youwill have to plan for while running the business. Note that even inrecurring costs, you have two types – fixed and variable costs.  

Foxed costs include all your knownmonthly bills such as rent, salaries (if any), consulting charges, maintenance changes, etc. You may also need to pay for debt servicingif you have raised funding in the form of business loans. 

Variable operational costs are thosethat are connected to your activities and sales. More activities meanmore spending on things such as office supplies and other thingsneeded on a daily basis. More sales means more inventory and/or rawmaterial and labor for manufacturing the product. It also meanshigher electricity bills and other utilities.

I think now you get the picture of howto calculate your startup costs. Your spreadsheet now includes theone-time startup launch costs, the recurring fixed costs, and therecurring variable costs. 

Some things – such as the per unitproduction cost price, is something that you will have to calculateon your own depending on how much resources (material, labor, utilities, overheads, etc.) go into making it.

But work on it. Put down all the costitems on the spreadsheet, and then find out how much each one isgoing to cost you. Add it all up, and you will know how much does itcost to launch a startup.

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