Looking to be an entrepreneur? Starting your own business can be exciting, empowering, and challenging. One of the first things you need to think about relates to financing your company.
As per Business Queensland ((Business.gov.au, 2020), cash flow is the most common cause of new business failures. From legal fees, compliance costs to administrative costs for rent, there are a lot of costs involved in setting up and running your business. Being aware of the costs involved in starting a business and planning ahead is the key to success.
Start-up cost list
The exact costs you will incur depend on your type of business, the industry, and the location. For instance, if you plan to have a brick-and-mortar store, you need to factor in the cost of renting the premises as compared to starting an online business.
Your business structure also influences the costs of setting up your business. Whether it is a partnership, trust, or company, or you plan to be the sole trader, has a bearing on various costs such as tax, health, and safety compliance, regulatory obligations, personal liability, and staffing.
In general, the costs you incur are related to these categories:
- Market research
- Legal advice
- Equipment and fixtures
- Preliminary accounting
- Tenancy and stamp duty
- Telephone and internet installation
- Power connection
- Initial marketing
- Raw materials
Do your research
While there are some one-time costs involved in setting up your business, there are some costs that are ongoing. It is important to identify which ones are ongoing and which are one-time.
To get a realistic idea about the costs, do your research and talk to industry leaders, business associations, and business owners. You can also look at websites aimed at helping entrepreneurs and new business owners. Participating in discussions and active forums help you learn from the experiences of other business owners, ask questions, and clarify your doubts.
Most industries have associations that provide information and support to new business owners. The Australian government website also has a start-up cost calculator that can be used as a guide to planning your finances.
A rough estimate of expenses
While the mandatory Australian Business Number is free, obtaining a business name (for sole traders) can cost you $35 for one year or $82 for three years. The registration cost for companies is $479, the average salary is between $69,477 and $89,846 per year in Australia depending on the location.
If you plan to rent an office space, rentals start from $300 while equipment such as a cleaning machine, coffee machine, or computer can take up about 40% of your overall budget.
In today’s digital era, a website is mandatory for every business. A simple website can cost you about $200 while setting up and running an e-commerce store can cost up to $2000 (Hayde, 2020).
Evaluate your business risks
Irrespective of the industry, it is important to think about the possible risks that your business faces. For instance, customers can trip and injure themselves in your retail outlet or restaurant. Apart from your clients getting injured on your business premises, there is also a risk of your staff member knocking over or breaking an expensive asset at your client’s house.
Another type of risk you face arises from the professional services you provide. For instance, if you repair a leak as a plumber and your customer believes the repair was faulty, leading to property damage, they can file a claim for the poor quality of service. The legal bills and other costs related to fighting such claims can place a huge dent on your financial health as well as your reputation.
When you are looking to streamline the costs of starting and running your business, protecting yourself against these risks is the top priority. Public Liability insurance is designed to cover the costs of legal bills and any damages or settlements you incur as a result of these risks.
As not all Public Liability policies are the same, it is important to carefully consider your business insurance needs as well as other factors when selecting a Public Liability insurance policy. According to the Australian government website, public liability insurance is compulsory for businesses (Business.gov.au, 2020).
The type of cover you need depends on the nature of your business as well as the extent of risks covered. It is important to read the policy wordings, inclusions, exclusions, and the business activities covered by the policy. Check this article to know more about choosing the best Public Liability insurance for your business.
Business.gov.au. 2020. Business Insurance | Business.Gov.Au. [online] Available at: <https://www.business.gov.au/risk-management/insurance/business-insurance> [Accessed 26 August 2020].
Business.qld.gov.au. 2020. Calculating Your Costs When Starting A Business | Business Queensland. [online] Available at: <https://www.business.qld.gov.au/starting-business/costs-finance-banking/calculating-costs> [Accessed 26 August 2020].
Hayde, A., 2020. How To Start A Business In Australia. [online] Blog.hubspot.com. Available at: <https://blog.hubspot.com/marketing/how-to-start-a-business-in-australia> [Accessed 26 August 2020].