Budgets are tough. Budgets aren’t always easy to stick to. And sometimes it’s an even tougher task to come up with a budget in the first place. Take, for example, the startup costs you’ll have as you get your franchise up and running. How much will everything cost? Are you prepared — fiscally?
A lack of cash flow is one of the most common reasons a small business doesn’t make it out of its first year. The better you understand your initial startup costs, the better off you’ll be in the long run. Seriously.
So before you approach a lender, let’s make sure we get a better handle on the variety of costs associated with becoming a Bin There Dump That franchise operator. The best way to do that? Make two lists.
Here’s a look at what should be on your lists.
Franchise Operators’ Assets and Expenses
Lists have this magical, almost liberating power to them. They can turn an overwhelming project (remodeling your home) or a tedious task (grocery shopping) into something much more realistic and logical. The same goes for figuring out all of your startup costs, the majority of which will fall into one of two categories, assets or expenses.
Assets are things you’ll need to use over the life of your business and are typically one-time costs. And they are generally paid on well before you’re officially “open.” Some examples include:
- Franchise fee
- Office furniture, equipment and supplies (obtain list of requirements or recommendations from franchisor)
- Fee for incorporation
- Down payment on real estate or lease
- Business cards
- Initial inventory
Expenses cover everything else — particularly recurring costs. Examples include:
- Utilities, phone, Internet
- Employee salaries (consider how many workers will you need, and in which positions)
Once you confidently assign a dollar amount to each individual cost, you’re well on your way to determining how much money you’ll need to get your franchise started.
Never Underestimate Your Startup Costs
Speaking of dollar amounts, it’s very important that you do not underestimate your costs. Never forget: You amass startup costs before you bring in any income. Be honest with yourself when it comes to making educated guesses about assets and expenses. Err on the side of caution and avoid downplaying your costs to fit the money you have on hand.
It’s important to differentiate between business and personal debt, too; business debt should be expected in your first 18 months of operation — don’t let that scare you.
Leverage Our Franchise Operators
From insurance premiums to employee salaries, there will probably be a cost or two you may have a hard time sticking an accurate price tag on. And that can be expected, especially if this is your first foray into franchise ownership.
If that’s the case, why not look to someone who’s been in your shoes? Bin There Dump That’s existing franchise operators have waded through the startup waters successfully — they’re the perfect resource to help you iron out any uncertainties with your list of assets and expenses.
Just think, once you’ve calculated all of your startup costs, you will have a much clearer image of what it’s going to take financially to get your franchise up and dumping.
For more info, here is a video of our Vice President and General Manager, John Ferracuti, exploring what kind of costs you can expect when starting up a franchise and what you should budget for in advance.
And to find out more about financing a new business opportunity, download our FREE e-book.