Start Up Cost Struggle

[Goodegging]

How are you suppose to account for every penny in the start up cost for setting up a business? I have managed to establish that it might be £16k but I can really know how much it will be once I have actually set up the business. I mean there are so many hidden expenses and other expenses which are underestimated so when the push comes to the shove the actual cost maybe £20k+!

Does this mean when obatining finance I should just say that I would like the £20k for the start up cost and then aim to keep it at £16k for the start up cost and allow £4k for the unexpected expenses? Any money left over could be used for advertising and other things to promote business. Other uses for money left over could be things like introducing new lines to shop when have overcome initial teething problems with business.

I just dont want to say I need £16k and then when it comes to actually opening business there will be a £4k shortfall

 

[i234i]

Get your cost and add 1/4 to 1/2.
I was about 1/4 over with unexpected.

 

[Goodegging]

what are typical unexpected expenses?

would it be okay to tell financers about hte unexpexted expenses and then using spare cash for other business investemnsts

 

[justinmarch]

IMHO...

You will need to uncover as many expenses as possible (everything you can think of should be covered and researched in some way) to put in your business plan, which you will also need if you are requesting money.

You should estimate your marketing costs as well base on whatever data/info you can get your hands on to back up your thoughts (at the very least for your own piece of mind)

If you highlight the areas that your unsure about perhaps someone, will be able to shed light on this for you.

 

[Joe E]

A part of your business plan is your cashflow analysis when you have done your figures for this I've found it useful to do what is called a sensitivity analysis where you decrease the amount of sales by 10% & 20% and at the same time increase your costs by 10 and 20%.
I know this is maybe not what you mean in that its not taking into account setting up costs but it might shed some light on the viability of your business as you go along.

 

[david rushton]

Personally I would get the estimate of costings as accurate as possible, and then add on a 'contingency' amount of around 25%. I don't think there is anything wrong with accounting for this, as it is expected your costs will always be a little higher than anticipated.

 

[Esk247]

as above...get the calculations spot on! dont say 'oh i can get that for less than that' etc etc because what if you can't. Be honest and include a few percent extra for any un-foreseen expenses e.g. extra tax costs or late delivery problems etc.

 

[DVWooly]

if you complete a comprehensive business plan, all of the expected cashflows should be included i would imagine you wont get finance without a business plan i can provide something for you if you want

 

[OldWelshGuy]

what are typical unexpected expenses?

would it be okay to tell financers about hte unexpexted expenses and then using spare cash for other business investemnsts

If we knew what they were they would be expected epenses,

 

[stevon]

Try overestimating what you know you'll need so that you'll have cash left over... I doubt as an investor I'd like to see "unexpected costs" - it could perhaps indicate you've not done enough research/you don't know exactly what you need. You should go and find every last thing you'll need (time consuming, granted) as if you were ready to make a purchase - walk through the process as if you had the money and that way you'll know if £16k will be enough or if you'll need more.

At least if you overestimate the costs it doesn't make you look daft and you have that spare money for cashflow/unexpecteds.

Whats your business idea anyway?

 

[OldWelshGuy]

In serious mode, a good business plan should always have a contingency % . If you do your homework, and get as much information as you can (as you are doing here), then add a 25% contingency on unknowns like web/marketing etc, then you will get a decent review by the bean counters. If you state that your fixed costs are known and ware 100% correct, but you have allowed a small % for increases etc, but that some areas where your reasearch has told you that un expected costs have been incurred, you have set a 25% contingency. if I were reveiwing a detailed plan like that, and it showed information along those lines, FAR from thinking 'this guy is swinging it', I would think 'this guy is prudent'