Back to: Business Planning 4 Financial Planning: Video Course
By the time you get to your financial planning activities, you have no doubt already started the process of drawing together your start-up costs.
This activity draws those costs together in one place and that cost in a such a way that you can see where those costs will come from – or what your short fall is if you don’t have enough saved.
But lets start with table 1 – Start-Up Costs
If you have followed along with Business Planning workshops 1-3, go back to your notes and gather those figures altogether to add to the first Start-Up Budget table.
Use this table to itemise all the costs you need to account for to get your doors open on Day 1. Add as many lines under each category as you need.
You can recreate this table as a spreadsheet if you wish to aid arithmetic or download a pdf of the table in the notes here: Start Up Costs
If you’re not sure whether or not it is a start-up item, ask youself if it’s necessary for day 1 ie if you don’t have it, can you still open your doors.
Items should be added as follows:
- Legislative/Insurance Costs: Licenses, annual insurance, memberships, etc. If, instead of paying insurance in an annual lump sum, you are going to break it into monthly payments, do not add it here, Instead, include it in your monthly operations costs and include it in the last item of this table.
- Staffing Costs: One-off training costs, uniforms, etc. (not ongoing wages)
- Capital Item Costs: Any large item including vehicle, furniture, technology.
- Start Up Production Costs: Items related to producing your services or products, can include admin, inventory, etc.
- Facility Renovation Costs: For lease-hold or owned premises where internal renovations are required. Includes, fixed shelving, lights, security, etc.
- Start-up Marketing Costs: All costs related to start up marketing activities. May include websites costs, initial marketing materials, etc.
- Other One-Off Costs: Anything not covered in the other sections. For example, you may need to pay a large deposit on a lease-owned premises. The monthly rent will be included in Operating Costs, but you could put the deposit amount here.
- 3-9 Months of Operating Costs: Depending on your comfort level, calculate how much you will need to keep the doors open and the lights on for the first 3-9 months of business. There is likely to be a monthly cost which you can multiply by the number of months that keeps you feeling comfortable. My suggestion is to leave this line item until after you have completed the cashflow forecasts activity as then you can transpose those figures directly into this table.
Note 1: For any items you will be bringing to the business, you have a choice to include in this table or not include. If you are including items you already have and have paid for, add a line for that item and state it’s current value. In the next time, we’ll account for it as monies you have already invested.
Note2 : If you are bringing any large capital items with you from a preceding business or your personal items, consult an accountant to decide how best to account for them longer term in your Financial Statements and Tax Returns.
Now, let’s move on to the Source of Funds table.
The source of funds table is literally a snap shot of how you will pay to start up your business. Banks and financial institutions will want to see it, as will partners who are considering jumping on board with the business.
- You can recreate this table as a spreadsheet if you wish to aid arithmetic or download a pdf of the table in the notes below: Source of Funds (1)
- Even if you are not looking for funding, it’s a good idea to create the table to double-check you have the funds ready.
- Create as many lines as you need under the different categories.
- If your Business Plan is a still a work in progress, and you are using this table to work out how much of a loan or cash or grant you will need to ask for, leave this blank for now.
Items should be added as follows:
- Traditional Financial Institution eg bank loan, credit union, Line Of Credit : Write the name of the organisation that is providing the funds and the amount they are providing. Non-Traditional Financial Source eg not-for-profit loan or grant: Write the name of the organisation that is providing the funds and the amount they are providing.
- Personal Investment: Create a line for each subgroup cash, savings, and existing assets and put a total amount next to each in the final column. If you have existing assets you are bringing to the business, and which will be solely for business use moving forward, list the current value of that asset here*
- Other eg family loan or investment, partner investment etc: These are the monies other people are providing to you for your business start up.
* As before, consult an accountant about how to account for these existing assets moving forward within your financial reports and to the tax office.
Once you have a total Source of Funds, you can look to see whether your start up funds are already covered, or whether you will have to consider a loan, digging further into your savings, or making some reductions elsewhere such as in the scope of your business in order to reduce your start up costs.
So now you know how much it will cost to start up your business and where the funds will come from, it’s time to look ahead and estimate how your business will perform over the next 1-3 years.
See you in the next video.
Community Futures Capital Region