When a business is being started, it incurs few costs, even before the commencement of its operations. These are included in its fixed costs and can be referred to as startup fixed costs. Having an estimate of these costs is essential, as a business needs to compare its startup expenses with the capital available, so to analyze the business feasibility and profitability chances. To make these calculations, a business startup costs estimator is often used.
What is a business startup costs estimator?
A business startup costs estimator is an estimator in an Excel spreadsheet that is mainly used for listing down the startup expenses as well as summing them up to find a total amount of the probable initial costs. The startup costs are not the same for all the businesses and hence the type of costs and the sum of all the initial costs may vary based on the type of business, size of business, and the priorities of the business owners/stakeholders.
Possible advantages of a business startup cost estimator
A few of the advantages are:
- Lists down all the startup costs.
While entering the data, all the applicable initial costs are listed, and their values are inserted. Therefore, it gives a quick overview of all the costs, that will be incurred, before starting the operations of a business.
- Aids in the calculation of total costs.
It has the in-built formula, to sum all values of the startup expenses. If a value changes in one of the fields, it will automatically change the aggregate value and give a correct view of the scenario.
- Helps in finding any discrepancies and taking relevant decisions.
If the total startup costs do not match the total available investment, this discrepancy can either be covered by borrowing more money or dropping the idea of starting a business.
Key entries of a business startup cost estimator?
This estimator can have different components, as per the circumstances. However, generally, the following fields are present in this sort of an estimator:
- Costs of borrowing funds, such as bank fees.
- Costs of licensing or any sort of permits.
- Insurance charges.
- Security deposits, e.g., to the owner of the property, will be used for business operations.
- Costs of devising a business plan or any initial plan.
- Research costs if the business needs any sort of beforehand research.
- Marketing and advertising costs, such as designing a logo, distribution of pamphlets, etc.
- Utilities installation expenses and deposits, e.g., telephone installation costs.
- Purchasing cost of the office supplies, furniture, equipment, etc., that will be used for the business.
- Initial Inventory cost, as some inventory, needs to be purchased before the operations are started.
- Any miscellaneous/additional costs.
- Total costs.
- Total capital available or total investment funds.
- The discrepancy between total costs and total capital available, if any.
If a business does not have one or a few of the above costs, a value of zero can be inserted in those fields, and this estimator can still be used. Otherwise, a modified version of the estimator can be used to make the calculations.
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