Finding ways to spend start-up capital is easy, but there are a few things that should be included in the start-up budget for every new business. The first five are:
Startup Essential #1 — Protecting your business
Getting your legal obligations and protections right from the start is critical to building a successful business. It may be tempting to put off registering your entity (LLC or Corp) or paying for a business license until you start making money, but delaying is not the best option. Those expenses not only keep you out of potential trouble, but also protect your personal assets from business liabilities. Business insurance is another essential protection for any start-up business. Even home-based sole proprietorships should look into small business insurance. The premiums should be quite reasonable, and the protection can be invaluable if something goes wrong. Getting started without setting up the proper protections can also be a slippery slope… if you’re good for a month without paying those expenses, why not two? Or six? The longer you delay, the more your business is at risk. Do your homework to find out exactly what is required for your business and get everything fixed before opening day.
The total cost of registering your business depends on which state you are in. Entity registration ranges from a couple hundred dollars total to around a thousand, if your state (like California) includes exorbitant franchise fees. Business licenses and tax certificates are generally pretty cheap, less than $100 in most areas. Business insurance varies greatly depending on your industry and coverage limits.
Startup Essential #2 — Small Business Software
Every modern business must have computers and the right software tools to minimize risk and maximize profitability. Without a doubt, all small businesses should use a reputable accounting system. Peachtree is the best in the market for those who plan to grow the business. Don’t rely on the free downloadable versions more than you absolutely have to, as they don’t include the accounting tools that help track and analyze profitability. Also, your business should have an office suite, such as Microsoft Office, which includes a word processor, spreadsheet, and other programs. Contact management software is also important: your best marketing returns will come from the customer list you build yourself. ACT! is the best option and is relatively easy to use. Other useful programs include office form templates, employee management software, and point-of-sale software that works with your accounting system if you have a physical store.
Budget at least $500 to $1000 for the software you will need. Peachtree’s Small Business Starter Program is around $200, ACT! around $230.
Startup Essential #3 — Marketing Tools
Every business should plan to invest in at least two key marketing tools before going live: business cards and an Internet presence. Business cards are still the number one means of networking… even employees of the largest online companies have business cards. You can get a couple hundred for free through various printers, but they’ll sell out fast. Select a high quality paper and make sure that the design and logo convey the image you are trying to develop. A web presence is an absolute must. You will need to purchase a domain name and web hosting service, as well as select software to create your web pages. Website software has come a long way – if you have basic computer skills, you can create a good website. This is not a place to skimp and save. There are “free” web hosting services, but they are unreliable and display ads embedded in their web pages. On the other hand, most businesses don’t need a professional web designer to create a good site. Try the software and talk to people you know… An entrepreneur we know mowed his internet-savvy neighbor’s lawn while the neighbor built a basic website using the entrepreneur’s software. Fair trade and everyone was happy.
In total, expect to spend at least $250 on these marketing materials alone. Most businesses need to spend a lot more to market successfully, but business cards and a website are a good start.
Startup Essentials #4 — Organization and time management tools
Every entrepreneur needs a system to manage time and stay organized. Your time will be randomly divided between 582 different things each day, so the more organized you are, the better. Start with a daily planner. Look for one that is customizable (like the no calendar) so that you can develop the best time management system for you. Develop a system for listing and prioritizing tasks and setting aside blocks of time to work on important elements of your business, such as the marketing plan and managing finances. Your planner should also include space to collect information about your business and competitors, your networking contacts, and any other critical data. A full size planner (8 1/12 x 11) is much more effective than smaller ones. Start using your planner as soon as possible so that the habit is ingrained when you are buried under business responsibilities! Also include tools to keep paperwork, supplies and products organized… you’ll have too much to do to waste time looking for what you need!
A good time management system should cost $50-$100, organizational tools will vary (filing cabinets, etc.).
Commissioning Basics #5: Information
As the owner, you will need to know all the details of what you are doing. From legal settings to your target market, from your product specifications to your store or website traffic patterns. First-time entrepreneurs tend to underestimate how much time and effort it will take to get up to speed in all aspects of business ownership. But, taking control by attending to the details yourself will reduce your risk and increase your chances of great success. Once your business is up and running, the learning must continue. Stay on top of news and innovations in your industry, read biographies of successful entrepreneurs, read up on the latest marketing opportunities. While it’s easy to answer a specific question through the free content available on the web, most entrepreneurs will need to spend some money on tools (books, trade associations) to ensure the business gets off to a good start by covering all aspects. critical to a successful start-up.
Include at least a few hundred dollars in your initial budget, but the amount will vary depending on the type of business you’re starting and the depth of planning you’ll do. Remember that the better you plan, the lower your risk. Add a monthly budget amount for continuing education, such as books, industry magazines, and the like.