How much is it going to cost? That’s what most entrepreneurs want to know about the businesses they’re starting, but estimating the total cost is tough. Not only are there a ton of details that you’ll fail to figure in, but the aspects that you do figure in are likely to change. Coming up with an accurate number is important though. It helps you determine a more precise budget as well as what kind of fund raising efforts you need to put forth. So here are a few tips to help you accurately determine the cost of your startup.

Have a firm business plan that you’re willing to tweak. If you think that your business plan is solid from the inside out and you won’t need to make changes, you’re delusional. Writing a business plan is essential because it forces you to take everything into account, but there will always be unanticipated aspects and issues—always. So you have to work on tweaking your business plan regularly. As often as changes come along, that’s how often you need to reconfigure your numbers, or at least close to that. If you let this become an irregular occurrence, then you could be in for a rude awakening when your financial projections turn out to be not what you thought they’d be.

Accurately calculate your initial cash flow. It’s an integral part of figuring out your startup costs, but it’s also an area where many entrepreneurs fall short. Either they think they have the coolest product/service ever and that people will be willing to pay an arm and a leg for it, or they want to come in at the lowest price and offer their product/service for dirt cheap. Both can lead to problems in the pricing arena, but in terms of calculating cash flow, they could lead to grossly inaccurate projections. So do your homework and find out what the REAL value of your product/service is.

Accurately estimate your startup time. You have to consider the time it takes to get things done, especially the things that you have little to no control over. Licensing is a good example of this. Sometimes licenses are completed in a timely manner, but that’s only sometimes. Also, if you’re building, buying or leasing a space, your timeline can get sabotaged by things like zoning and safety inspections, so take those into account as well. When you’re working with the government and regulations, anticipate just about anything. If you don’t figure in the cost of this added time, your total cost could be much higher than anticipated.

Costing out an entire business as accurately as possible is time consuming and difficult, but you have to do it, so do it right. Take the time to get as close to an exact number as possible and be willing work with that number along the way.

      del.icio.us   SphereIt   Reddit   Furl