Chapter 5
Calculating Your Start-up Costs
Nothing splendid has ever been achieved except by those who dared believe that something inside them was superior to circumstance.
—Bruce Barton
Now we get down to the nitty-gritty. Having come up with an idea that works for you—financially, emotionally, intellectually, marketwise, or however else you define it—the next step is to figure out what it will actually cost to start that business and what level of sales you will need to achieve to sustain it.
Assumptions
Figuring out your start-up costs and potential sales is a matter of making educated assumptions. In the last chapter, I suggested that you do a lot of research, much of which will come in handy here. What will it cost to start a business like the one you envision? The numbers you input here will help you figure out how much money you will need and can make, and they will apply equally to the business plan that you will write (explained in the next chapter). You will incur many expenses when starting a business from scratch. Some of these will not be encountered again—the cost of incorporation, security deposits, that sort of thing. Others are ongoing expenses—marketing materials, rent, and so on.
Calculating these costs is a four-step process. The first three steps help you understand how much money you will need for initial start-up costs, the purchase of assets, and monthly expenses. The fourth step helps you understand your potential sales and how much money you will need ...
