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How much cash do you need in the bank, as you launch?That’s usually the toughest starting cost question.
Here is another simple example: the starting costs worksheet that Magda developed for the restaurant I used for a sample sales forecast.
Magda’s list includes rent and payroll, the same as in her monthly spending, but here they are included in starting costs because these expenses happen before the launch.
Now may be the time to ask yourself: should I complete the plan by myself or should I hire a consultant? If you aren’t committed to your business idea, you will just be wasting everyone’s time — and your own money — by hiring a consultant at this stage.
If you decide to hire a professional business plan development consultant, what skills and qualifications should you look for? This sounds like a silly question, but it really isn’t.
For existing companies that already have financial results, projections start with the expected ending balance of the previous period. Starting costs are essentially the sum of two kinds of spending.
You can estimate them both in two simple lists: I’ve used a bicycle store as an example in several posts that are part of this series of standard business plan financials.Breaking the items down into a practical list makes the educated guess a lot easier.Ideally, you know the business you want to start, you are already familiar with the industry, so you can do a useful estimate for most of the startup costs from your own experience.Here’s a visual in spreadsheet form, of sample starting costs for a hypothetical bicycle store.Notice that the lists for estimating starting costs, on the left in the illustration above, are matched to another list of starting funding, on the right side of the illustration.If you don’t have enough firsthand knowledge, then you should be talking to people who do.For others, such as insurance, legal costs, or graphic design for logos, call some providers or brokers, and talk to partners; educate those guesses.Magda did that to determine the ,000 needed as starting cash for her restaurant.Note how, in the illustration here, the lowest point in cash is slightly less than ,000: That low point comes, theoretically, in the third month of the business, March. Obviously that’s just an educated guess, but it’s based on assumptions for sales forecast, expense budget, and important cash flow factors including sales on account and purchasing inventory.She is able to raise enough money, between loans and her savings, to put ,000 into the starting cash balance. Then she launches and continues to have her monthly reviews, and watch the performance of all key indicators very carefully.You’ve decided you need a business plan, but you’ve been struggling so much with it that you’re ready to drop the whole thing. If you are just toying with an idea, or have not invested much time in research and planning, you may not be ready to think about a business plan.