Things You Should Consider When Starting a Business IV-Start Up Costs and Overhead

In your business plan, you need to have what your start up costs are and what your monthly overhead will be for running the business.  This would be a good time to also take inventory of your monthly personal expenses because if you are planning eventually on quitting your dayjob (or making this new gig your new day job) you should know how much you need to live each month.

Whatever numbers you come up with figure anywhere between 10-35% extra padding should be added to account for emergencies, holiday expenditures and if all things go well, money for expansion of your business.

Let’s take the previously mentioned example of a hot dog cart.  I have no idea if these numbers are realistic but they are here to serve as an illustration of start up costs:

hot dog cart                           $3000

hot dogs                                 $200

buns                                      $200

condiments                               $75

business license                        $25

resale license                              $0

fliers                                      $100

sodas and chips                      $540

Total Start Up Costs:             $4140

and we will throw in 10% emergency cash of $414 to make our total start up costs a grand total of $4554.

Let’s say you need to replenish the hot dogs, buns, sodas and chips each month.  I know I forgot to add napkins so I can take some of that money from the emergency cash I allocated up front.

Our monthly overhead might include gasoline to drive to a location, say the front of the County Courthouse at lunch time – $300 a month.

Figure $1015 a month for expenses.

That is your monthly forecast for what you will need in the worse scenario cases if you don’t even sell one hot dog.  Are these acceptable costs for you and do you have the money to gut it out for 3-6 months till people see your cart and start realizing what a delicious hot dog really tastes like?  What if the weather is lousy and you are stuck with rain for three months?  How will you make expenses meet in the meantime since hot dogs won’t keep forever and you will have to rebuy new ones?

Again, please be sure to do your research in advance and make sure that the start up costs aren’t too high or that your expenses aren’t going to mushroom out of control and eat up all the profits that you will be making!

Questions?  Comments?  Please let me know!  Thanks for reading!

Kim Greenblatt

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