The Real Costs of Starting a Business

Business model written in a notebook.By Marshall Reddy

There are different costs to consider when starting a new business venture. It’s advisable to write a business plan as a blueprint for the first few years of operation, and it can be hard to estimate business costs unless you’ve started the same entity previously.

Also, you will have to do some calculations before starting your new venture, and there’s still no guarantee that the calculations will be accurate. The reality is that starting a business is a financial risk.  According to Inc. Magazine, 50 percent of all new startups will fail within 5 years. However,  when it comes to a franchise business, the groundwork is already laid out for you and the cost much more predictable.


Understand the Types of Costs Associated with Starting Your Business

Long before beginning your new company, you should be assessing the startup outlay you will have to make. Some expenses will be one-time purchases while others will be recurring. They will differ depending on whether you start your own business or open a franchise.


Capital Purchases

These purchases will occur initially during the startup phase. For example, if you are starting a restaurant, the purchases would include kitchen appliances, restaurant tables and chairs or signage. For an office, expenditures would include furniture, computers, decorations and office equipment like copiers.


Essential Purchases vs. Optional Ones

At startup, you’ll have to decide what expenses are essential and what ones are optional to the success of your business. In the case of an office, for example, you will need to purchase computers for your employees, but if you hired remote employees, they would have their own office at home. You wouldn’t be required to worry about their computers. In a cafe, you might like to have warming ovens, but they are not required if you make everything to order. For a startup, there’s a bit of uncertainty regarding what you’ll need. For a franchise, you’ll know exactly what purchases have to be made.


Fixed or Variable Expenditures

Fixed expenses are ones that are the same on a month to month or yearly basis. Fixed costs can include rent or lease payments each month. They’ll be the same for the terms of the rental or lease agreement. Fixed expenditures can include employee salaries too. Variable costs are ones that change constantly like those for materials and ingredients. They change based on vendor agreements as well as demand from customers or clients.


Capital Costs

Big purchases like land, buildings, vehicles and machinery for your business are included under capital expenditures. They’re also the most expensive parts of a startup. Without these capital investments, you won’t be able to get your business running.


Marketing and Advertising Costs

You won’t open the doors of your new venture to throngs of customers. To properly open a business, you’ll have to add in the expense of marketing and advertising. These will vary from month to month depending on the kind of campaign you’re running, but it’s vital for adding into the business plan since it can make or break your success in the first year. Franchise owners have the added advantage of support for their marketing efforts.


Your Business Idea or a Franchise Model

When you are starting your own business, there’s no way you can foresee all the expenses and costs.. There is an unknown based on the fact that you have never started this type of venture before. You can try to find a mentor, but for most you are on your own. With a franchise, you’re taking a proven plan and implementing the same steps as a successful company already operating. This can take out a lot of the guesswork when it comes to your startup.


Fixed costs and purchases will be easy to calculate, but other costs like marketing and materials will be harder to figure out when you’re starting your own business unless you choose a franchise. It can be a good choice for a potential business owner who wants to take much of the guesswork out of starting their own business.

marshall reddyFor more information about owning a franchise or for help discovering if franchise ownership is right for you, contact Marshall Reddy at Franchise Florida, America’s local, trusted franchise experts. Call 904-248-1820 or email For more reading on this subject and more, visit

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