So you want to start a business and are wondering where to start and how much it will cost… most would advise you to start with writing a business plan, and I’m not arguing with that… you should, but it’s essential that you Be aware that most business plans, including all the research and finances that go into them, don’t give you a big picture of what your startup costs will be. This article provides an overview of ways to realistically determine what the costs involved in starting a business will be.

A solid plan? Probably not! A well-formed and flexibly applied plan? Absolutely!

It is true that the usual way businesses are started is through identifying an opportunity, determining the ways in which this opportunity can be exploited for all it’s worth (explained carefully in the business plan) and calculating how much capital necessary to build the business as described in the business plan mentioned above.

While this is ‘business as usual’ and can often work, there is a flaw with this model… Everything is built on the premise that the business will work right, and as planned, the first time! The reality is that it’s exceptionally rare for everything to go exactly as planned, and most of the time, even if it does, it’s not the first time.

Often, between the time a business plan is written and the time it’s implemented, it’s hardly worth the paper it’s written on. Hard but true.

To more accurately and relevantly determine start-up costs, it is essential that you carefully review the assumptions contained in the business plan and be prepared to adapt to a more flexible approach. Now, I am in no way advocating that you don’t need a business plan… I think they are immensely useful because they allow us to consider as many elements necessary to start and grow a business as possible… but the plan is only as good as the action you take, and to get the biggest return on action, it’s key to have plans that are relevant and based on the most current context.

Part of your plan should always be to review the plan… You may need to repeatedly change things as you learn more, determine the impact of what you’ve learned on your business, and then add to the plan accordingly.

Consider lowering and pilots

I know how it is…you have a fantastic business idea, you see the potential, you see how great it can be, and you want to do everything you can to make that vision a reality. While this is the only way to get some business concepts that are more or less ‘Go big or go home’, this is not always the case.

Where possible, consider scaling back and proof of concept. This will get you started, while saving money, learning from the pilot, and being able to make changes and raise more funds based on the proof of concept. This approach not only reduces start-up costs, but provides valuable insight into the business, in real terms. It may not generate much profit, but it will provide a wealth of verified information to help you determine your next steps… If you decide to continue expanding, it’s a great foundation for phase two financing.

Consider realistic terms and prices

Part of calculating your startup costs will involve calculating your startup cash flow. Without actually operating the business, this can be tricky. It’s also not uncommon to fall into the trap of undervaluing products and services in order to have a better chance of competing and “tempting” you into more business. Note that you don’t necessarily need to do this. If you do, raising prices to the market standard could become difficult at a later stage and you will have to work much harder to break even. My advice: recognize your value and value your value accordingly.

Consider a realistic time frame for go-live

Time is always potential money, and when you’re just starting out in business, this is even more true. If you’re going to have fixed costs like property leases, if improvements or modifications are required before you open, this impacts both time and money (very directly). These additional costs add to your initial costs, but also add to the time before you can start earning. Don’t fall into the trap of underestimating when you’ll be ready to trade, and build a good buffer of time before you ‘need’ to see funds coming from trading activities. Failure to do so could create a significant amount of stress, and in some cases even cause a business to close before it has had a chance to get off the ground, simply because there wasn’t enough time to give it a try. to get going.

Consider the cost of money

Many entrepreneurs who have a great idea that they strongly believe in will make the decision to finance the business themselves. Sometimes this can come at a great personal cost, using credit on credit cards or loans, tapping into home equity, etc. While for some smaller companies the impact may be negligible, for larger companies, self-financing should be considered exceptionally carefully before committing to this option. If there are funds in abundance and possible delays, changes, etc. it will have little impact and will be compensated by the return, no matter how long it takes… then go for it! If this is not the case, and unforeseen delays and progress will cause great personal and financial strain that could jeopardize business success anyway, then definitely consider other options.

In conclusion…

As you can see, starting a business doesn’t start and end with a business plan, but rather goes beyond that and encompasses broader considerations. This article lists some of these.