It is great of you to be industrious and start a business after all every big organization started somewhere. But before you actually open those doors, there are some particular financial facts and costs that you must understand. All of them are applicable irrespective of whether it is a home-based firm, an e-commerce portal, or brick and mortar company.
Of course, you can pay an accountant or a business advisor and have all these information explained to you. Or, you can go through this post and learn more about the costs management for startups – for free!
But first, what is the essence of Costs Management for startups?
Finance forms the lifeline of any business as the more money it is injected in, the bigger the returns. For someone new in the business world, proper management of costs directly has an impact on how the business takes off and thrives. And, even if the idea is highly lucrative or you have a lot regarding capital, it is better to understand the art of managing costs.
Have a look.
Types of startups costs
- Fixed Costs: They are all those costs you incur, yet the don’t change as you sell a unit of product or service. Fixed costs can either be marginal or variable fixed costs. To better understand them before starting your business, read the following:
- Professional fees – what you pay the lawyer, accountant, solicitor, and any other expert professional expert to help sort out the legal perspectives of your startup.
- Insurance – public liability insurance, building insurance, car insurance, employee insurance, etc.
- Premises renting costs – rent, building costs, power bills, water, telephone, gas, etc.
- Staffing and employment – advertising and recruitment costs and training courses.
- Sales marketing
- Variable costs: They increase if you sell an extra unit of a product or service, and usually fall under direct product costs like:
- The actual cost of an item – from the stock
- Shipping costs
- Packaging costs
- Sales teams’ commissions and Remuneration
- Salaries and wages
Much like every enthusiastic entrepreneur, you will be eager to give your startup as smooth start as possible. While you might be tempted to rush things up without focusing on better deals, the smoothness of the capital and everything, just try to do the following:
- Lease or rent instead of buying so that the initial costs remain as low as possible.
- Hire term and temporary workers so that you can avoid meeting employee tax, insurance, NI, and pension payments.
- Make use of price comparison websites that still offer routes to the best deal for utilities.
- Pay as you go is perfect for starting, instead of tying yourself into long contracts and expenses that will not allow getting out easily