Have you ever gone shopping thinking you know how much you’ll be spending, but when you get there the item you’re buying is wayyyyyy more expensive than you thought? Ya, me too. That’s why I wrote this guide to help you make sure your business plan includes a realistic understanding of how much it will cost to start your business.
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Building a business plan and thinking of how much you’ll be spending is a bit like shopping during a huge sale. You’ll get started thinking you’re only going to spend $100, or $500, or $5000 – but when you begin choosing items there will be an overabundance of great stuff, and you are going to feel like you NEED it in order to be successful in your business.
Some of it will actually be perfect for your business and some will only sound perfect, but turn out to be a big waste of money. Because of this, it’s best if you approach with at least some idea of what you are willing to spend. That way, when presented with the options, you will hopefully think twice before buying something that might not be right for your business.
So, let’s talk about the areas of your business plan that you will likely need to spend money.
Licensing, permits, and business entity
All businesses, no matter how small, will need to make sure they have the proper business licensing, permits, and entity setup. However, this doesn’t always cost money. Conduct an internet search for “your city + starting a business” to find the requirements for your area.
This is likely not the only requirement, there may be county, state, and country regulations as well, but this is where you need to start. Find out if a business license is needed and what the cost is (if any). If you are starting anything health or food related, be sure to check into health permits with your county. If you will be selling products, you’ll also need to check into a Sales & Use Permit with the state.
Also, if you are naming your business something other than your last name, you may also need to get a DBA/FBN, which costs money as well. Visit our How to Get a Business License post for details about this.
To learn more about choosing an entity for your business plan, visit Business Types to help give you an idea of which you might need and what it may cost.
Your business plan needs to include branding costs. Creating your brand – the look and feel you want to present to the world – is an area you should definitely plan for. There are free ways to build a brand, so you don’t need to worry about spending thousands of dollars here (unless you have the funds to do so, in which case, go for it).
You’ll want to create a logo for your new business. This can simply be your name in a certain font, it doesn’t have to include a graphic element. Before you toss that idea, think of the icon classics like ABC and Disney before you judge. You’ll also want to choose colors and the overall look you are going for (contemporary, romantic, formal, fun, quirky, etc.).
For your logo, you can create your own with something like Adobe Illustrator and Lynda.com. Illustrator is a graphic design software that allows you to create just about anything you can imagine. Lynda.com is a teaching website that can teach you step-by-step how to use Illustrator (and a lot more if needed). Illustrator is part of the Creative Cloud program at Adobe and is about $50/mo or you might be able to purchase it separately. You can get current pricing at www.adobe.com. As of this writing, www.lynda.com is around $25-30/month. Both have a free trial period so you can check them out.
If you’d prefer to have someone else create a logo for you, check out www.99designs.com. Starting at $299, they offer packages for all sorts of graphic design elements (logos, business cards, websites, letterhead, etc.). You submit what you are looking for and the styles you like and graphic designers from around the world submit a finished product. You simply choose the one you like best.
Website And plugins
There are literally thousands of options for building a website for your business. You can choose a free platform such as www.wix.com, www.worpress.com, or www.weebly.com. They each have paid versions as well, but provide small free websites you can create in a couple hours. Paid options on these websites usually include a few more bells and whistles and range in cost from about $10-$35/mo.
If you want more customization options, another option is to purchase hosting yourself then use a platform such as WordPress.org (not to be confused with wordpress.com) to build your website. Hosting can be purchased through someone like www.bluehost.com* for around $2-3/mo (check for current specials as they always seem to be having a sale). Bluehost offers free WordPress downloads, so there’s no extra cost there.
You would then simply choose a theme for your WordPress then you can get started building. There are free and paid themes available depending on what you need your site to do and what look you are going for. If you have $30-$130+ to spend, paid themes are worth the cost as they have a bit more thought put into them and are usually more well-built and SEO friendly (for paid themes, check out www.studiopress.com and www.elegantthemes.com).
Plug-ins are software you can add to your WordPress site that allows your site to do some pretty cool things. Everything from adding social media icons, to creating members only area, to adding a fully functioning e-commerce store, to website security and so much more. Some are free and some are paid, so it’s simply a matter of deciding on the functions you need then searching to see what the costs might be for the higher ranking plug-ins.
You can browse plug-ins at www.wordpress.org. NOTE – these only work with wordpress.org (not wordpress.com). Be sure to check rankings and choose those with good reputations and track records.
To learn more about building a website, please visit How to Build a Website.
An often overlooked area in a business plan, legal fees are important to make sure your company is built right and protected from day 1. These fees are in addition to the licensing/entity fees we spoke of above and include things such as business insurance, privacy and terms and conditions policies for your website, contracts (if needed), and more. Be sure to speak with an attorney about your specific business to see what they recommend and costs.
Insurance can vary in cost depending on your business. For a small e-commerce business, you can usually find policies for around $30/mo. For a larger brick-and-mortar business with various items needing coverage (equipment, computers, etc.), the cost will likely be higher. Insurance will protect you if something happens to your business (theft, fire, flood) or you are sued, so don’t skip this piece.
Accounting and payroll
Your business plan will need to include a way to keep track of your income and expenses for tax purposes. This can be free, by using good old pencil and paper (or an excel spreadsheet), or paid if you choose a software.
I use Quickbooks Self-Employed for around $10/mo. There are many others to choose from as well for around the same cost (FreshBooks, Xero, etc.). I chose Quickbooks since it automates quite a bit, so I don’t have to spend hours on accounting. It automatically downloads my transactions from my bank, so all I need to do is look over them occasionally to make sure they are added to the correct category (the type of expense or income). It also automatically tracks my mileage which is awesome if you drive for your business.
Not everyone needs payroll – if you are a sole proprietor and it’s just you, you can skip this part. But, if you are a larger business and will need employees or independent contractors (such as Virtual Assistants or sub-contractors), you’ll want to check into payroll companies as well.
At the moment, Quickbooks offers the cheapest payroll option – but you have to self-file all of the tax returns and make the payments to the IRS yourself. If you’d like someone else to handle it instead, they offer a more expensive version or you can look into other payroll companies for their costs (check out www.gusto.com).
If you will have employees, you’ll also need an EIN (Employee Identification Number) before you can apply to a payroll company (though they probably have links to help you get that started).
This will include anything you will be paying for to advertise your business, from brochures or business cards to buying an ad on Facebook. You’ll want to think carefully about how and where you will get people to your business.
Luckily, in today’s social media world, there are tons of ways to advertise for free. Your business plan can include using your current contacts and social media to spread the word, so this does not need to cost a ton of money when you first get started.
Supplies and Miscellaneous
For this area, you’ll need to consider a few different factors:
- Are you selling a product? If so, what will it cost to build your inventory (or get it started)?
- Do you need any equipment or tools? Any special kinds of vehicles?
- Will you work from home or rent office space? Or lease a brick-and-mortar location?
- Do you need a new computer or any special technology?
- Will you need to hire anyone? What will their salary be?
Try to think of everything you’ll need to run your business, from extra pencils to a new oven. What will you need to start making money?
There you have it! A basis to begin building your business plan. Visit Business Costs for an example of fees I paid to start Taykoff. You can also visit how to start a business for step-by-step guidance on building your new business.