So far we have come up with a business idea (luxury dog walking), we have a market (high-income dog owners in St. Louis), we have researched our industry and our competitors, we have determined how many dogs we can walk each week. Now, let's start thinking about expenses.
10. How much money does your business need to run? This is a complicated one. Your expenses will vary greatly depending on what type of business you are planning to start. But we will talk about this in general terms and you can brainstorm your own business specific expenses that might not be listed here.
First, let's discuss start up expenses and one-time expenses. Remember a few posts back when I said it is not impossible to start a business with very little money, that's true, however you do need some money to start any business. There are some general expenses which you will pay for starting your company, but luckily most are not terribly expensive. Some examples are licensing fees, website domain purchases, legal fees for establishing your business entity, possible registration fees for your business entity, accounting fees for help setting up your tax accounts, etc. There may be more or less startup fees for you depending on what type of business you're in and where your business is located. You can usually find good lists online by searching something as simple as "how to start a business in St. Louis". If you ever feel lost or uncomfortable with the forms you have to complete to register your business, ask for advice from an attorney or accountant. It is always better to be safe than sorry.
Secondly, there will be additional start up costs that will be more expensive. Some of these things will be optional and some of the pricing will be discretionary - so you can spend as much or as little as you like, but just make sure to give yourself a realistic budget for this planning exercise. Some of these expenses are: website design, business cards and stationary, equipment and furnishings for your office (if needed), computers, cell phones, printers, other technology, leasehold improvements, etc.
Next, we should think about the cost of our office space. Now, I am not sure a dog-walking business requires an office space, but if they ever want to offer additional services like grooming or dog-washing, they will definitely need a place to work. Remember we are just planning right now, so we are not yet ready to lease any office space. But we can estimate how much our office space will cost by shopping around online for commercial spaces. I like to look for as many spaces as I can find pricing for online. Determine where they are located and drive by if I don't know the area. I make a note of the pricing and the extras (usually maintenance and taxes) for each location. Commercial realty prices are most often listed as triple net or NNN. So for example, a property might be listed as $15 NNN. This means you will pay a total of $15 per square foot per year. So 1,000 sq feet at $15 per square foot is $15,000 and if we divide that by 12 months, our monthly payment will be $1,250. I also make other notes about how much traffic there is at the location, what other kinds of businesses are located there and what the neighborhood is like. Once you have a good idea of the pricing, you should be able to plan a budgeted expense for the monthly lease cost based on how much space you think you need.
Additionally, we need to budget in the cost of security deposits for utilities and for our leased space. Utility deposits for commercial spaces are usually much higher than residential deposits. So call your utility company and ask them for an estimate. Sometimes they can give you a rough idea and sometimes they can only tell you if you give them a specific address. Speaking of which, once you find a space you are interested in leasing, you should definitely call the utility companies and ask them how much the monthly bills run for that location.
You will also want to add in a line item for things like office supplies, dues & subscriptions, association fees, uniforms, repairs & maintenance (if you have an office or store), finance charges, credit card processing fees, postage, travel expenses, etc. These expenses vary pretty widely, so I'm not going to go into how to determine each one. Just use an estimate for your planning. And always try to estimate too much rather than too little.
The rest of your expenses will be highly dependent on the type of business you are opening. For example, any retail store is going to have a very high cash outlay for inventory when starting up. A restaurant will have high equipment and food costs. For our dog-walking business, I am going to assume that I am just running the company out of my home. Since it will just be me working there to start, there will be no employee costs. Your business may be different. If you are going to have employees, be sure to budget for payroll taxes which can run 10% of your labor costs or more.
One thing that every business should think about is marketing expenses. Because believe me, the old phrase "if you build it, they will come" does NOT apply to starting a new business. So, in our next post we will focus on marketing our new business.
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