Common Start-Up Expenses for Online Companies
by Carrie Hinkel on September 20th, 2007
When considering starting a new online business, one of the first things a smart entrepreneur should do is compile a list of all the expense items needed to begin. Try to get as close to actual costs as possible, only estimating when absolutely necessary. Listing out your start-up expenses in the beginning will help you to have realistic expectations about starting your business. It will also help to answer questions such as “Do I have enough capital to start this business the right way?”, “Will I need to obtain financing?” and more. Here is a list of the most common types of start-up expenses that most small business owners encounter:
Market Research: If you decide to do the research yourself, most of this will be spent in time researching the competition, target market, interviewing potential customers, etc. However, if you decide to hire a market research firm or conduct focus groups, monetary costs will be involved.
Creating a Business Plan: This is another step that many business owners decide to do themselves instead of hiring a consultant. The important thing is that you have a business plan; whether or not you a seeking outside financing.
Advertising: It’s usually smart to begin promoting your company and its products or services even before you’re officially open for business. If you’re a skilled marketing writer then you may be able to do the press releases and marketing materials yourself, otherwise you will need to hire a copywriter and/or promotion company.
Inventory: If you are stocking product, this will no doubt prove to be your biggest expense. However, you can keep these costs low by always asking for payment terms and keeping initial orders at distributors’ minimum quantities.
Employees: Depending on how large or elaborate your business will be, you may need to begin training (and paying) employees even before your business is officially open.
Insurance Costs: For most businesses, it’s smart to have both liability and property insurance to protect yourself and any business assets. Also, depending on the state your company operates in and the number of employees you have, you may be required to have workers’ compensation or health insurance. It’s best to check the business insurance laws and regulations for your state in advance.
Licenses and Permits: Depending on the city and state your business is operating in, your business may be required to have a business license, sales tax license or seller’s permit. You’ll need to check with your local city and state government offices to find out exactly what you will need. Usually, the cost for each is minimal and it’s always best to be prepared and have all your necessary paperwork in order before starting your business.
While these expenses are the most common for new online businesses, yours will surely have additional items that pertain specifically to your new company’s needs. Creating a custom expense list for your new business will give you a realistic estimate of what it will take to get your new business off the ground, and if financing will be necessary.