If you’re thinking of starting a small business, you need to make sure that you have enough money to meet your expenses, particularly in the first year. And in order for your business to become successful, it’s important that you identify the hidden costs involved in setting up and running your business and to plan for these costs.

Do your research

You can find out what costs may be involved in starting your business by:

• Checking the public financial statements of other businesses in your industry, particularly those of your competitors and market leaders.
• Talking to other business people and industry associations, such as business owners, mentors and experts (either directly or through online forums).
• Creating a business plan and speaking with a banker or accountant who can tell you what your start-up costs may be for the first year.

Costs you may not have considered

Your startup costs will depend on the type of business you’re setting up and the industry you’re in, but here are some of the costs to watch out for:

Set-up costs:

• Office equipment and furniture, e.g. desks, chairs and cabinets
• Shopfront equipment, e.g. cash registers and refrigerators
• Stationery and office supplies
• Utilities, e.g. water, gas, electricity and telephone
• Starting inventory, e.g. buying stock and/or raw materials
• Consumables, tools, fixtures and fittings
• Vehicles

Marketing costs:

• Advertising and promotion for the opening of your business
• Market research
• Graphic design for signage, e.g. logo
• Creating a company website
• Letterhead, brochures and business cards
• Yellow Pages listing
• Internet connection and hosting fees
• Sales and administrative costs

Premise costs:

• Building design or architectural plan
• Premise modifications, e.g. electrical, lighting, painting, and security and ventilation systems
• Fit-outs, e.g. installing the kitchen, constructing the bathroom, and plumbing (gas and water)
• Rent/lease bond, stamp duty, lease agreement advice and leasing car spaces for customers
• Cleaning the premises, e.g. daily waste removal
• Maintenance

Technological costs:

• Equipment and service, e.g. computers, printers, fax machines, scanners, modems and IT servicing
• Software, e.g. accounting, security, design and documents
• Internet and mobile packages

Financial costs:

• Working capital, e.g. for accounts receivable and stock on hand
• Insurance, e.g. public liability, professional indemnity, building, contents, income protection, WorkSafe/workers’ compensation, vehicles, stock and fire insurance
• Insurance advice from an insurance company, bank, building society, financial institution, insurance agent or broker
• Banking packages, e.g. overdraft facilities
• Loans, e.g. loan establishment fees and other charges (interest payments)

HR costs:

• Using a recruitment agent or advertising
• Establishing contracts
• Becoming an employer member of various funds
• Learning and understanding your employment and OH&S obligations
• Salary of the owner/manager
• Employee salaries and wages
• Staff superannuation and associated costs, e.g. WorkCover, annual leave, payroll tax and insurance
• Uniforms and safety clothing
• Work equipment and tools
• Health and safety, e.g. first-aid kits, alarms and fire extinguishers.

Intellectual property costs:

• Trademarks
• Patents
• Domain name registrations

Compliance and licence costs:

• Licences, e.g. business registration, Australian Business Number (ABN), Goods and Services Tax (GST) and council permits
• Tax obligations, e.g. quarterly GST payments and PAYG withholding tax
• Certificates, e.g. Food Handling certificate and Responsible Serving of Alcohol certificate
• Legal work and lawyer fees
• Accounting work and bookkeeper/accountant fees
• Accounting and legal advice

Some tips for managing your costs

After you’ve identified the costs you’ll incur when starting your business, you’ll need to:

• Decide which costs you should manage yourself and which you should outsource or delegate to hired professionals
• Split your costs into two categories: 1) one-off costs for getting the business ready and 2) ongoing costs. This will help you develop a cash flow forecast so you know when money flows in and out of the business.
• Overestimate costs by adding 10% on top of your total costs for miscellaneous and unexpected expenses
• Include your costs in your budget so you have the cash if and when needed
• Review ongoing costs and allocate enough funds for them in your budget on a yearly basis