Thinking of starting a new business? You need to understand these costs.
Got a great business idea you are itching to hit the gas pedals on? Chidi did too. His idea was everything when asked, the sheer impact of it was supposed to be bigger than Hiroshima.
He wanted to create a Tinder for Traffic, to help people connect while they are stuck in the constant Lagos traffic. He got some funding from his uncle and launched into research and writing the codes for his mobile app. He is almost done with the app, but guess what? He exhausted all that funding capital before the business even started.
Starting a new business can be exciting, comes with its thrills. But the excitement can quickly transform into anxiety and fear when you can’t keep track of the funds before the business even kicks off. This is why we often say “Sell First, Launch Later” for the one reason that, you need to be nimble about launching your product, you can’t have it all covered from the first day. But this is a whole day’s lesson, so let’s get straight to this.
At Triift Africa, we are rooting for your ideas and we don’t want to see greatness end before it even begins, that is the essence of this post. To prepare intending small business owners for the overlooked costs that come with starting a business. These are some of the things that are likely to take your money when starting a new business.
Promotion and Advertising: Do you have a plan to get people to know about your new business when it kicks off? What is the cost of this plan? Have you thought of that? Have you thought about cheaper ways to get word of your business out to prospective customers?
Finance Costs: If your business plan involves getting a loan to fund the business. Have you factored in the interests you will have to pay whether or not the business is making money?
Office Space, Equipment and Supplies: Most of the time when business owners think of getting an office space, they’re only concerned about the rent. A whole lot of other costs should be considered. E.g. furniture, decorating, electricity, cleaning, etc.
Business Registration and Licensing Fees: Registering a new business costs some money. May not be a lot, but every time counts. Some businesses need a license to practice too. If you plan to own a food place for instance, you need to get a license from the Foods and Drugs Authority.
Research Expenses: Have you thought of how much will go into market research? While a lot of us love to go with our guts and be intoxicated with our ideas, we need to have a finger on the behaviours of our potential users and align our products with their unique needs. The expenses to understand audience behaviours can be a tonne, and you need to factor those costs in.
Technology Expenses: Because it’s 2018 and most businesses are done online. You may need to pay for website development, software for accounting, and others like that.
Employees Expenses: Many business owners don’t think of this. Even if you do not plan to hire anyone soon, you are the first employee of your business. You should make plans to pay yourself whether or not there is profit to prevent you from taking money from the business.
How to get ahead of startup costs
Draw up a Budget: As part of your business plan, draw up a budget for preliminary expenses. Get an idea of how much each of those items cost and put that in the business plan. It matters to the profitability of the business too.
Eliminate and Trim: when you draw up a budget, you will realize some costs that you can either minimize or totally eliminate. We have some ideas:
- Marketing for your small business should not put a hole in your pocket. You can do it for almost free. We wrote about it earlier, read it here.
- Hold back on getting an office space if you can run the business from home till you expand.
- Don’t pay so much for interest on loans, save up money for your business, get donations from family and friends or talk to us at Triift Africa, we give loans to small business owners at very low cost.
- Get freelancers to do your job instead of full time employees. You don’t have to pay insurance and other benefits to freelancers.
- Learn how to manage your website by yourself. Also use free software for your business till you expand.
We talked about some of the ways that you can keep your eyes on profitability and the real metrics that matter in our free profitability checklist available for download
Do you need to talk to someone about your business idea? We are that someone! Contact us at Triift Africa here. Love this? your claps keep us writing more, so give us 50 claps, you don’t get to convert them to cash, it’s like V-Bucks, you only spend them here.
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