The first task for a start-up business is to work out how much money you need to start the business, and whether you have sufficient savings or need to obtain finance. The type of start-up costs will differ depending on whether you start a new business, buy an existing business, or buy a franchise.

Just opening the doors to start operating your business will incur some expenses. For example, you may have legal, accounting, and consulting fees while you are planning your business; you may need to pay for licences and permits, connection of utilities, and arrange insurance; and you will need furniture and equipment, office supplies, retail shop fit-out, advertising and printing, and starting inventory. Also include an amount for working capital - cash to fund your business until you actually start to collect payments from customers.

It's important to estimate these expenses accurately so that you don't leave out important expenses. Even if you have carefully researched your start-up expenses, opening a new business often costs more than you anticipate. It is recommended you add a separate item (called contingencies) to account for these unforeseeable expenses. Make an allowance of about 20% of the total establishment expenses for contingencies.

Make a note of how you arrived at your forecasts of expenses. For example, provide supplier details, quantity and price, and assumptions. Also explain the amounts and terms of proposed loans, how much will be contributed by each owner, and what percent ownership each will have.

Download the BIZTool: establishment costs spreadsheet

What's next...

• Prepare a cost of goods sold forecast
• Find out how to work out your expenses forecast
• Prepare a sales forecast for your business