Startup costs
Startup costs are the expenses you incur before launch. Depending on where you are in the startup journey, you may have already moved past this stage.
If you’re just getting going, though, then you’ll have to calculate necessary startup costs such as:
- Computers
- Furniture
- Property
- Inventory
- Security deposits
- Equipment
Fixed costs
Fixed costs, also known as overheads, are expenses you incur at the same rate, each month, regardless of how your company performs.
The classic example of a fixed cost is your rent. It doesn’t matter if your company sells two million dollars or two dollars in product that month, your rent remains the same.
Fixed costs are the easiest to calculate because of this factor.
Other examples of fixed costs include:
- Wages
- Utilities (some, others are variable)
- Website hosting
- Insurance
- Financial repayment obligations
Variable costs
Variable costs are those expenses that fluctuate each month, typically in response to sales and revenue performance.
The most obvious example of a variable expense is the cost of raw materials. If you’re producing a physical product, then the more you produce, the more raw materials you’ll need to purchase, so your variable costs increase for that period.
Other examples include:
- Advertising and marketing spend
- Sales commission
- Some utilities
- Business income taxes
- Transport
- Freelance services
Because variable costs are more difficult to forecast accurately, it’s best to build in some buffer to this aspect of your budget. For example, round up a $473 estimate to $500 to give you some leeway for unexpected increases.
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