Finding ways to spend startup capital is easy, but there are a few things that should be included in every new business’s startup budget. The top five are:
Startup Essential #1 — Protecting Your Business
Setting up your legal obligations and protections correctly from the start is critical to building a successful company. It can be tempting to put off registering your entity (LLC or Corp) or paying for a business license until you start making money, but delaying is not the best option. Not only do those expenses keep you out of potential trouble, they also protect your personal assets from the liabilities of the business. Business insurance is another critical protection for any startup. Even home-based, one-person businesses should look in to small business insurance. The premiums should be pretty reasonable, and the protection can be invaluable if something goes wrong. Starting without setting up the right protections can also be a slippery slope…if you are okay for a month without paying those expenses, why not two? Or six? The longer you delay, the more you put your business at risk. Do your homework so you know exactly what is required for your business, and get it all squared away before opening day.
The total cost of registering your business depends on the state you are in. Entity registration ranges from a couple hundred dollars total to around one thousand, if your state (like California) includes exorbitant franchise fees. Business licenses and tax certificates are generally pretty cheap, under $100 in most areas. Business insurance varies greatly depending on your industry and coverage limits.
Startup Essential #2 — Small Business Software
Every modern business must have computers and the right software tools to minimize risk and maximize profitability. Without question, every small business should use a reputable accounting system. Peachtree is the best on the market for those who plan to grow the business. Don’t rely on the freebie downloadable versions any longer than absolutely necessary as they do not include the accounting tools that help to track and analyze profitability. In addition, your business should have an office suite, such as Microsoft Office, that includes a word processor, spreadsheet, and other programs. Contact management software is also important — your best marketing returns will come from the customer list you build yourself. ACT! is the best choice and is relatively easy to use. Other useful programs include office form templates, employee management software, and point-of-sale software that works with your Accounting system if you run a brick-and-mortar store.
Budget at least $500 to $1000 for the software you will need. Peachtree’s basic small business program is around $200, ACT! around $230.
Startup Essential #3 — Marketing Tools
Every business should plan to invest in at least two key marketing tools prior to startup — business cards and an internet presence. Business cards are still the primary means of networking…even employees of the largest online businesses all have business cards. You can get a couple of hundred for free through several print shops, but they will go fast. Select a high-quality paper and be sure the design and logo impart the image you are trying to develop. A web presence is an absolute necessity. You will need to purchase a domain name and web hosting service, as well as select software to build your web pages. The website software has come a long way — if you have basic computer skills, you can build a good website. This is not a place to scrimp and save. There are “free” web hosting services, but they are unreliable and flash built-in ads on your web pages. On the other hand, most businesses do not need a professional web designer to come up with a good site. Try the software and talk to the people you know…one entrepreneur we know mowed his web-savvy neighbor’s lawn for him while the neighbor put together a basic website using the entrepreneur’s software. Fair trade and everybody was happy.
Altogether, expect to spend at least $250 on just these marketing materials. Most businesses need to spend far more to market successfully, but business cards and a website are a good start.
Startup Essentials #4 — Time-Management and Organization Tools
Every entrepreneur needs a system for managing time and staying organized. Your time will be divided randomly among 582 different things every day, so the more organized you are, the better. Start with a daily planner. Look for one that is customizable (like the Uncalendar) so that you can develop the best time-management system for you. Develop a system for listing and prioritizing tasks and setting aside blocks of time to work on important elements of your business such as the marketing plan and managing the finances. Your planner should also include space to collect information about your business and competitors, your networking contacts, and any other critical data. A full-size (8 1/12 x 11) planner is far more effective than the smaller ones. Get started using your planner as soon as possible so that the habit is ingrained by the time you are buried under business responsibilities! Also include tools for keeping paperwork, supplies, and product organized…you will have too much to do to waste time searching for what you need!
A good time-management system should run about $50 to $100, organizational tools will vary (file cabinets, etc.).
Startup Essentials #5 — Information
As the owner, you will need to know all the details of what you are doing. From the legal setup to your target market, from your product specs to your store or website’s traffic patterns. First-time entrepreneurs tend to underestimate how much time and effort it will take to get up to speed on all of the aspects of business ownership. But, taking control by attending to the details yourself will reduce your risk and increase your chances of great success. Once your venture is up and running, the learning should continue. Stay on top of news and innovations in your industry, read biographies of successful entrepreneurs, read up on the latest marketing opportunities. While it is easy to answer a specific question through the free content available on the web, most entrepreneurs will need to spend some cash for tools (books, trade associations) to ensure the business gets off to the right start by covering every critical aspect of a successful startup.
Include at least a few hundred dollars into your startup budget, but the amount will vary depending on the type of business you are starting and the depth of planning you will do. Remember that the better you plan, the lower your risk. Add a monthly budget amount for continuing education such as books, industry magazines, and the like.