The startup budget shows how much money you need to start up your business. You could also call it an establishment budget.
Amount for startup
The total startup budget is the sum of money you will need to find to start your company. You can either use your savings, or take the conventional route and take out a loan or arrange an overdraft facility with the bank. Borrowing money from your friends and family is another option.
There is a huge difference in what individual businesses need during the startup phase. A business which produces 10-metre-long concrete pipes needs large sums of money to purchase machinery, raw materials and buildings, while an IT consultant who solves software problems for small companies basically only needs the knowledge he already possesses.
Items in the startup budget
It is hard to generalise about which items of expenditure might be relevant and necessary to include in a startup budget. It will depend on each individual case. However, a number of general points will often need considering.
If you need to rent premises for your business, it is often necessary to pay a three-month deposit to the lessor. It might also be necessary to pay three months' rent in advance.
Items for including under premises in your startup budget:
- If you need to buy premises, a down payment will usually be required.
- You will also have to pay for goodwill if you are taking over another business which has built up a good reputation for itself over the years. In other words, you are paying for the work which the previous owner has invested in his business.
- Sometimes, key money has to be paid to be allowed to take over a business in a good location. The more central the business address, the bigger the compensation that will be demanded by the previous owner.
- Once you move into your new premises, they will undoubtedly need to be decorated, so remember to allocate money for this purpose.
Fixtures and fittings, car and office articles
You need to specify and price the fixtures and fittings, as it is often surprising how much they cost.
Items to include under fixtures, fittings, car and office articles in your startup budget:
- Office articles such as paper, paper clips and printer paper, which will be needed from day one.
- If the business needs a car, you will need to budget for the down payment. You can use your own car for business purposes, but then you need to keep a logbook of the mileage. Another option might be leasing a car.
Production equipment or tools
If you are starting a production business, you will have to purchase the machinery you need. Machines can be entered in the accounts in several ways and represent an important entry.
Items for including under production equipment or tools in your startup budget:
- Production equipment can also, for example, include powerful computers used for image processing.
- Tools might be anything from a screwdriver for the mechanic to buckets, brushes and mops for the cleaners.
Sometimes it is difficult to decide whether an item is a "tool" or "production equipment", but it usually does not matter how such items are classified. What is important is that they are included as an expense.
As a business owner, it is important that you have competent people to advise you within the relevant spheres of activity. Consequently, this must be included as an entry in your budget.
Items for including under advisers in your startup budget:
- Lawyers are needed for drawing up partnership agreements or to set up a private limited company (ApS), enter into collaboration agreements, leases etc.
- Accountants are useful for drawing up and discussing budgets.
- Other advisers can be brought in to assist in areas where your competencies are lacking in relation to starting up a business or as regards the continued operation and development of your business.
Marketing expenses can vary from very little to several million kroner depending on the size of your business. In your new business, it will be necessary to tailor your marketing to your budget and market your business as much as you can possibly afford to.
Items to include under marketing in your budget:
- Letterheaded paper, business cards and envelopes with your business name and any logo need to be ready before you start.
- Brochures may also need to be ready before you open for business.
- Ads, in which you advertise your opening or tell the outside world that you have an exciting service to offer.
- Signs for your car or mounted in front of your business also need to be ready from day one.
- An opening reception, if you have one, will also need to be paid for.
Some expenses will not fall under a particular entry and may be non-recurring items. In such cases, enter them under miscellaneous.
Items which you might include under miscellaneous in your startup budget:
- Patent or design protection, which may in certain cases be necessary.
- Your private expenses may need to be financed for the first few months before the business starts generating an income.