Funding, profits, sleek websites,
fleece vests.
Everyone loves talking about
startups but nobody likes talking about
startup costs.
Fortunately, I do.
That's right.
We're talking about startup costs.
If you're more of a reader, check
out the article and don't forget to
like and subscribe for more videos
from our series, "Ready, Set, Goals."
I know.
Even if you love math, estimating
startup costs can seem a little
overwhelming.
Don't worry though, you're not going to
need to know calculus or trig or even the
square root of 7,625.
All you need is a few basics to have
everything you need to get your
business in gear.
Just like powerful tech CEOs, no
two businesses are the same.
So going into this, your costs are
probably going to look pretty different
than other businesses and that's okay.
As an overview, determining your
startup costs depends on a lot of
different factors, but most businesses
can expect to have to cover these things.
So what are the two main types of costs
you need to calculate for your startup?
That's right.
When starting out, you have to plan
for fixed costs and one-time costs.
Let's start with fixed costs.
Those are ongoing expenses you're
going to need to pay on a regular basis.
If you're a tech startup, that'll
be stuff like software, server
maintenance, and of course, a ridiculous
amount of snacks.
For you, that might also mean stuff like
your monthly rent, payroll for you
and your employees, taxes, legal
services, software, loan repayments,
insurance payments, utilities, and
marketing costs.
We cover a lot of these things in other
videos so be sure to check out our channel
for a more in-depth look at these.
Regardless, you already manage a
lot of these kinds of payments in
your day-to-day life, such as rent.
So you've already got the basics down.
Go you!
One-time costs on the other hand are pretty
self-explanatory.
These are the costs that you'll probably
just have to cover once right when
you're starting up.
These expenses can outweigh the profits
for the first few months of starting
a business so keep that in mind when
you're crunching your numbers.
Almost every kind of business has to
pay one-time costs when they start up.
This includes permits for your industry,
incorporation fees, branding elements
such as a website, business cards,
a cool logo— have a cool logo—,
down payments and even improvements
to properties.
So that's the basics of fixed costs and
one-time costs.
Now it's time for the important
part: deductibles.
When you're starting a business there are
certain things you're allowed to deduct as
you get things going.
According to the IRS, there are
three categories of start-up costs
eligible for tax deductions.
Number one, creating a trade or business.
That means everything you need to do to
decide if you're going to start a
new business like surveying markets,
analyzing products and labor and other
technical parts of investigating a new
or existing business.
Number two is any costs you incur
before you open your business.
This means you can write off a portion
of the cost over a period of time before
you open for good.
Eligible expenses include stuff like
employee training, travel expenses,
and advertising.
Finally, you can write off certain
organizational costs.
If you legally set up your business
as a partnership or corporation before
the end of your first year, you can
typically deduct these costs as well.
That means you can write off stuff
like legal fees, state organization
fees, and more.
Again, this is just an overview.
There are people who dedicate their
careers to this type of thing.
So when it comes to write-offs, consider
working with a CPA as you get your business
off the ground.
Now you can take all this information
and start crunching some numbers.
Remember, experts say you typically
need about a year and a half's worth
of funding when you're starting out.
So keep that in mind as you
start calculating things out.
And that should be everything.
Thanks for stopping by.