How To Calculate Initial Outlay

When you decide to open a business it is a wise decision to calculate the initial outlay prior to going into the venture.  By doing these simple calculations, you will be able to decide whether you have enough money to open or if you will require financing.  This will also give you the opportunity to determine whether the business really has the potential to be profitable once the doors are open to the public.

Begin by gathering the following monetary figures: the cost of any business licenses, incorporation fees, fictitious name costs and any other regulatory fees. Next, you will need to know the cost of renting your building and the required deposit amount, utility deposit fees and any installation fees for telephone or internet services. Make a list of office furniture and supplies you will need to open your doors initially and figure out the costs. Once you have these three figures, you have the costs for your office.

Next you will need to account for the cost of all your production equipment, initial supplies and products and any training manuals or sessions you will have to arrange for new employees. This is a very important part of calculating these costs.  You must be as accurate as possible when generating these figures.  This is the main part of your business.  Without enough equipment or product you will not have anything to offer to your customers.  Proper training of employees must be included here, and you will need to account for a period of time that your company will be open but not producing product while the employees learn the routine.

Finally, gather all of the figures from the estimated cost of employee wages, employment taxes, corporate taxes and the cost of any benefits or insurance that you will provide. These three groups of figures, when added together, will be your initial outlay to open the business. You should budget for a few months' worth of salaries if possible.  This will allow you to cover payroll during the introductory stage of your company.  This is critical to any business, as sales may be slow in the beginning.

Many of these costs can be offset later when taxes are due.  Credits given for being a small business, a minority-owned or a green company will reflect in your final tax bill.  Opening in economically challenged areas as well as hiring people with disabilities or who receive public assistance will also gain your company additional tax credits.


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