How much does it cost to start your own business?

According to an estimate by the Kauffmann Foundation, the average business start-up cost in 2009 was  $30,000. However, every business is different and so is its budget. Many micro-businesses such as home-based sole proprietorships can get off the ground with less than $3,000! Some home-based franchises in fact, might have upfront investments as low as $1,000-$5,000!

All the same, costs vary depending on the business so it it imperative to understand the costs of your particular business and how to reach your breakeven point before you get started.

Here are some simple tips for calculating your start-up costs:

Step 1: List Expected Expenses

Start-up costs are technically defined as any costs incurred before income. It’s an important distinction to make because they will impact your tax return. Start-up costs are broken down as follows :

1. Expenses – Costs that come with preparing to open a business such as market research, advertising, training, wages, mileage costs for scoping out a location, and any fees paid to professional consultants (lawyers or accountants).

Up to $5,000 of these costs are tax deductible in the first year of business. The remaining costs are then amortized (meaning you deduct them in equal installments) over a period of 180 months (starting with the month in which your business opens).

However, it’s important to note that the deduction benefit from your research will be considered personal costs and non deductible if you decide not to open a business. Read more about the ins and outs of start-up deductions in How to Write Off the Expense of Starting Your Business.

2. Capital Expenditures – One-time costs to purchase assets such as inventory, property, vehicles,etc. These don’t typically qualify for a deduction, but can be written off through depreciation.

 

Assess Your Assets

Part of starting a business from scratch means taking a risk with personal investment. The money you currently have in the bank will be your primary asset for a while, used to pay off necessary business and personal expenses such as payroll, rent, utilities, etc. until the business is self-sustaining.

Allocate Costs

Using a spreadsheet, create a list of the start-up expenses and capital expenditures that you expect to incur, alongside the assets that you have. Try to assign costs to each expense, even if it’s a best guess.

Make the Calculation

After you’ve created your estimates on the spreadsheet, you can easily calculate your costs with the free Starting Costs Estimator Calculator, developed by PaloAlto Software and offered by Entrepreneur.com. It also includes a sliding scale that lets you estimate your cash reserve needs based on your estimated monthly spending and money in the bank.

If the costs look too high, revisit your expenses and look for ways to cut them. If you need meeting space but can’t afford a commercial lease, consider co-working spaces or serviced office space. You can also cut the cost of many office tools by using cloud-based services instead of pricey software licenses (use google drive instead of purchasing Microsoft Office).

Get Help

Small business resources like your local Small Business Development Center, Women’s Business Center, Veteran’s Business Center or the mentoring experts at SCORE can all help.

Here are a few more resources to bookmark:

 

By: Kevin Hickman

Content from this article was re-blogged from Caron Beesely, who works with the SBA.gov team.

Food is not just a daily necessity, but a passion for many, especially for the people involved in the What’s Cooking Concept Plan Competition! Tonight, the passion for food will ignite as small food business entrepreneurs compete for $15,000 in zero interest loans in the What’s Cooking Competition held at Court Square Theater at 6:00 p.m. Admission to the competition is free of charge and includes the opportunity to vote for the “People’s Choice Award”!

Ask any out-of-towner about Harrisonburg’s buzzing food culture and “surprising” would be the most likely response. To the locals however, it’s no secret that this small town’s food industry is booming and with culinary trends toward local and approachable food, it’s easy to see why. Simply take a stroll through downtown Main Street and you can’t pass by without noticing eager feet rushing into the newest restaurants.

kev_muan__869x576This kind of vigor and excitement is exactly what the Shenandoah Valley Small Business Development Center (SV SBDC) and Harrisonburg Downtown Renaissance (HDR) are trying to inspire. Partnering with Rockingham County and the City of Harrisonburg, these organizations have created “What’s Cooking (WC),” a five-month pilot program that encourages growth and development in the local food industry by helping entrepreneurs fine-tune concepts for viable businesses.

Last fall, the program kicked off with an event called “Pitch Night,” where 14 food entrepreneurs received feedback from the community on their culinary business concepts. Since October, 22 participants in the program have attended a series of workshops and seminars conducted through the Shenandoah Valley Small Business Development Center at the Ice House in downtown Harrisonburg.

Each Monday Meeting (held about every three weeks) touched on various aspects of the food industry, from marketing to competition analysis to food pricing and lease negotiation. Local and industry professionals, including representatives from the Virginia Department of Agriculture and Consumer ServicesVirginia Tourism Corporation and the National Restaurant Association, attended the sessions to offer assistance to the participants.

Chef and Owner of the Shenandoah Meadows Grains Company Marsha Hyatt said, “This program has helped not only me but so many others develop plans, brainstorm and connect with others in the food community. I came to the program with the basic idea of what I wanted to do and with the help of the program, I have been able to expand and get from the ‘idea stages’ to the ‘concrete planning stages’.”

Hotiman Ridwan, an aspiring restaurant owner, said that “Involvement in the program has increased our confidence and allowed us to become better equipped to address the many decisions we will encounter as we start a new business”. A restaurant manager and 18 year veteran of the hospitality industry, Ridwan and his partner Mark Mitchell are utilizing the benefits of “What’s Cooking” to achieve their dream – the BoBoKo Fusion Café. Unlike other international restaurants, his cozy tropical cafe will offer alternatives to full meals, serving smaller portions of Southeast Asian fusion style dishes inspired by street food from his home country of Indonesia.

Jason Hendricks is developing and testing recipes for producing uniquely handcrafted Root Beer. His focus is on perfecting three non-alcoholic flavored soda products and distributing to local bottle shops, restaurants and craft breweries. His main challenge is gathering start-up funds and access to a commercial kitchen in order to perfect the carbonation process and build up quantity for distribution.

Tonight, contestants will be judged by a panel of three industry professionals on the quality and appeal of their verbal and written concept plans. Respective to their winning title, four contestants will be awarded with interest-free loans in the amounts of $5,000, $4,000, $3,000 and $2,000, time in a commercial kitchen, and an assortment of professional service packages provided by sponsors Brown, Edwards & Co.Estland Design, BotkinRose, the local Chamber of Commerce and others.

“What’s Cooking” has been a great success, which means there is a distinct possibility of future competitions. Come to the “Concept Plan Competition” and watch as culinary dreams come true!

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By: Kevin Hickman

Infusionsoft, a private company that offers marketing and sales software to small businesses, recently conducted a study that found 62 percent of small businesses stated”word of mouth” was their best marketing tool – nearly twice as effective as email (34 percent), the second highest rated tactic!

So how does one develop a reputation and expand their audience size by mere hearsay? Try these 11 tips:

1. Set Quantifiable Objectives – Vague word-of-mouth objectives like “getting everyone to talk about us” are useless if they can’t be measured. As with any other marketing tactic, the ability to monitor your progress is essential. Create objectives like “getting X number of new customers through X number of referrals per month or generating X number of leads per month via word-of-mouth marketing.”

2. Create a System for Generating Referrals. Encourage customers to give referrals to other customers by offering bonuses, give-aways or discounts. (Click here for more on generating referrals.)

3. Offer Special Deals to Referred Customers. Give new customers discounts or special offers in return for trying your business.

4. Promote with PR. Keep your business in the public eye by establishing relationships with local journalists, members of the media and bloggers. Keep them informed about your company’s latest news, accomplishments and future plans.

5. Get Active in the Local Community. Sponsor or participate in public events that give back to the community such as fairs, 5K races or any program where the proceeds go to charity. If the logo of your outdoor apparel store is on every runner’s t-shirt, who are they going to think of the next time they go on a hike?

6. Network with Other Business Owners. Just like establishing a friendship with the local media, developing relationships with small business owners in your community can become another form of PR. Other businesses can become your customers and refer their friends and associates.

7. Make use of Your Personal Connections. Use your friends, family and any organizations you belong to to spread the word about your business. Post an an ad to the church bulletin or leave brochures at the front desk of your local gym.

8. Hand out Extra Business Cards. This is a no-brainer. Always give extra business cards to new clients so they can pass them out to friends and colleagues who might require your services.

9. Keep Tabs on what Customers Think. Conducting focus groups, regularly checking your online ratings and reviews, and keeping tabs on social media are all good ways to know what type of word-of-mouth customers are spreading, whether it’s positive or negative.

10. Pay Special Attention to Unhappy Customers. Unhappy customers are inevitable. Win them over by going out of your way to find a solution and offering outstanding service. Never ignore or minimize their problem because unhappy customers tend to complain to more people about their experiences than happy ones boast.

11. Always Ask New Customers How They First Heard About You. Try to get as specific as possible—if they learned about you from a friend at the gym, which gym? Tracking how customers learn about your company will help you assess how well your word-of-mouth marketing efforts are working so you can focus on the most productive avenues.

These tips were provided by Rieva Lesonsky, CEO and President of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses

 

By: Kevin Hickman