Putting up your very own business can be an exciting venture. Finally, you are rid of your unfulfilling, energy-draining nine-to-five job. You don’t have to battle your way through the rush hour traffic just to get to the office on time. You don’t have to deal with your lousy co-workers and your supervisor from hell.
Just before you jump right into the fray, take the time to ask yourself if you’re really ready for what lays ahead. Running your own business outfit 24/7 is pretty much like parenting – you have to be constantly on top of things.
No monkey business
Your business’ financial account is just one of the most important aspects of a start-up business that you have to be very keen about. Some rookie entrepreneurs think that putting up the financing for your business ends by the time you open shop and start taking in orders.
The fact of the matter is that there are three different types of expenses that you have to look into if you’re going into business on your own, and you will incur them throughout the lifetime of your business and not just at the beginning.
The first is business taxes, which are levied equally across a specific category or value of business. The rates are pretty uniform and you have only deduction and exemptions to count on to lower the tax due from your business.
The second type is called capital expenses, which are the costs of acquiring specific assets for your business such as equipment that have a useful life of more than one year and go into improving the quantity or quality of the service or product your provide. Perhaps you want to start a printing business, so you have to purchase color ink printers. You cannot deduct the purchase price from your taxable income, but you can still recover the money through depletion or depreciation.
Finally, you have to contend with business expenses. These are the day-to-day expenses that you run up in operating your business, such as gas money, rental payments or utility bills. These costs are usually tax deductible, so you have to keep meticulous records and receipts in order to back up your assertions in your business income tax return.
Bring out the calculator
Now that you know the general type of expenses you will be incurring as you do business, you’ll have to look into the specifics of each in order to have a complete picture of just how much you need to shell out before you can start your operations.
For example, your state or city may require business license fees for certain types of business. An additional fee may be imposed if you want to register your business name as well. This can be treated as tax expenses because they will be incurred only once in a while, usually every year, and are necessary to ensure your business’ compliance with legal requirements. To be sure, you have to consult a lawyer and an accountant.
Your capital expenses will depend on whether or not you need to buy property to run your business. Some businesses require very little beyond the basic stuff like a telephone, laptop and modem, such as financial advising or blogging. Others will definitely need equipment capitalization, such as if you want to open a car detailing business or a culinary school.
Both your capital and your business expenses will vary greatly depending on what type of business you want to run. You may or may not need your own office space, which will then dictate whether you have to rent or buy a studio-type office in town or you can make do with a home office for now.
There are also advertising costs to consider, which can be very vital unless you are launching a well-choreographed social media approach to introduce yourself to the market. Insurance can be another often forgotten but important expense that you’ll have to add to the list.
At the end of the day, you will be surprised how much money it will take you before you can even start scouting for your first few real customers. Your start-up financial worksheet will probably look a little like this:
|Web site expenses, if desired (domain name, web host, site creation and maintenance)|
This is just a sample computation and you don’t have to spend for every little thing listed if you don’t need to. Calculate how much all the items will cost you over an entire year and you’ll have a good idea of the total of start-up costs you have to pay for.
This article was written by Justin Toladro from Life Insurance Finder, A comparison website offering advice to compare life insurance policies that best suit you and your family.