Calculating Costs
What is meant by initial capital costs?
Initial capital costs are usually one-off payments to get the business off the ground, and they can vary considerably. For example, if you work from home then you're likely to have very little capital outlay. But if you were opening a shop, a restaurant, or perhaps setting up a small industrial unit, then your capital cost could be quite considerable.
What should I include when calculating my initial capital costs?
Whether it's a shop, a restaurant, or a craft-based workshop, or perhaps a small industrial unit, you'll need to think about decoration, lighting, heating. You'll also need to consider equipment and tools, and maybe fire precautions or security installations. And you'll certainly need to have things like office furniture and equipment and a telephone installation. And all these could come to between twenty or thirty thousand pounds.
What other initial start up expenses are there?
There are other less tangible things that you'll need and which may recur from time to time. I'm thinking about things like stationery design, and the initial supply of Web site design and maintenance. And a domain name. You might want to join a business club for networking purposes. It all depends on the type of business. But do remember these all cost money.
What ongoing costs do I need to consider?
Well, ongoing costs such as rent and staff costs, you may imagine come out of the money that the business makes. Oh yes, it will. But you need to cover yourself for about the first three months until the business starts to make some serious money. Well, as well as those ongoing rent and staff costs I'd talked about, you will be getting bills for employer's national insurance contributions (if you employ people), for telephone, electricity, water, business rates, insurance. And don't forget to include the interest on your loan. All this could amount to 40,000 pounds. And if you yourself have some money that you could put into the business, say, some legacy or some redundancy money or savings, then deduct this from the total cost figure that you arrived at. And you will have calculated the amount you need to borrow.
When should I get an accountant involved?
Well one of the first things to do is to get a good accountant. You need someone who understands small businesses. Don't go to the big firms. But try to get someone who knows the peculiar requirements of a small business.
