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May 09, 2013

Determining Your Start Up Costs

If you're thinking about starting a business, you'll want to take a look at the start up costs you're going to incur to not only be sure they won't sink your ship before you set sail but also to create a plan for your business. Start up costs are any expenses you'll have in order to get your business off the ground. Here are the areas you may want to consider for your business and calculate the costs:

Inventory Costs

Think of everything you will need to manufacture your product and how much stock you'll need to start. This includes your equipment and tools, materials, size labels, etc.

Marketing Costs

Anything you may need to get your business into the eyes and ears of the customers. Business cards, personalized shopping bags, membership fees, craft sale fees, advertising, website development, etc.

Legal Fees, Licenses & Permits

You definitely want to start off right and be covered. Trademarking, copywriting, having a disclaimer written for your product or a terms of use drafted for your website, confidentiality agreements, partnership agreement, business license, permits, insurance, etc.

Office Space & Supplies

Where do you plan on working each day? Your expenses will obviously be more if you plan on renting a space as oppose to working out of a spare bedroom, but consider the space and what you will need in the first month. Rent, utilities, furniture, stationary, office supplies, postage, phone line, internet access, etc.


Most handmade businesses start off pretty small with just one or two people but if you plan on going a bit bigger to start, consider everything your employees will need. Wages, uniforms, compensation, etc.

If you're having trouble thinking of everything, run through in your mind, a day of making your product, getting it out there and selling it to the customer. Be thorough and take the time to think of everything and research costs. It's also a good idea to add in an extra 10% to account for miscellaneous items and unexpected costs.

Once you've figured out your start up costs, take a look at your Overhead Costs, your Pricing Structure and then do some simple calculations to determine whether you business has a chance to be profitable or not (check out our article Will Your Business be Profitable for some simple calculations).

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