Calling All Student Entrepreneurs: Tell Us About Your Startup

The 06 Essential Startup Expenses [And Few Not So] You Should Consider

Dec 25, 2015

Starting a new business can be one of the most rewarding risks for an entrepreneur. You can plan and think simply – start, grow to grab the opportunities, exhibit that you are making money, and finally call it a success.

But in reality, building a startup is hard. Most startups fail and one of the reasons behind startup failure is that, they run out of money. Many startups simply fall in a hoax and expenses unnecessary amount of money. 

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However, you cannot ignore some essential expenses when you are building a startup. But it is important to understand and build a culture around the idea of building a frugal organization.

We have tried to put together a list of six essential expenses one should take into consideration when planning to start a startup or already building one.

1. Market Research and testing your idea
Once you have an idea, your next job is to understand whether your idea is viable or not. One of the ways of doing so is by doing a small market testing of your idea. Though, there are controversy around the idea whether a market research is important or not but it is good for understanding product-market-fit early on.

With free tools available online, you can conduct your own research or hire a market research company for doing the job.

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2. Legal Expenses
Company registration and setting other internal legal values with the company are few other expenses you must consider while starting a business. Legal expenses include RJSC fees, lawyer fees, and few other trifles. You can find company registration related information here.

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3. Product and Infrastructure
Building your product is the most important cost associated with starting a company. If you are building a tech company and you need to develop a software or a website or a platform, that is a cost you should consider seriously. You can either outsource, which most founders suggest against, or you can hire a small team for building the product.

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4. Design and development
Another underrated but essential expense for startups is design and development of logo, brochures, legal pad, money receipt etc. Naturally, founders tend to hire a permanent designer but don’t go for one unless you have a regular design demand. Outsourcing can be a good option.

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5. Accounting and Finance
Most founders underestimate the importance of maintaining accounting and finance and seldom show inclination to hire accountant early on. But it is a mistake. You better have someone to look after accounting and bookkeeping and billing and invoicing. Setting money and accounting straight for the success of your business.

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6. Work Station and facilities
It is better to use a coworking space when you have a small team and keep your expenses related to equipment and utilities under control. However, there is expenses related to using a coworking space and also, if you are working from home you should have a good Internet connection.

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Extras: People often spend money in unnecessary areas. Here are few such relatively less important expenses startups often consider important.

1. Office
It feels good to have a big and lavish office but it is often counter productive. Don’t have a one unless you need one. Work out of your home or use a coworking space but never go for a big office unless you really need one.

2. People
Most founders take pride out of the size of their team. It validates the idea that we are doing something cool and also a vanity metrics of success. But you better don’t give into that heedless luxury. Stay lean and don’t hire unless you are seriously under-staffed. Under-staffed startups are way better than over-staffed ones.

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This not a exclusive list and it may vary startup to startup. Needs of every startup is unique. But this list may be a starting point to start thinking when you are considering to start a startup or already started one and trying to find some directions to build your expenses plan.

As Ruhul wrote, "In the world of startup you buy time by spending money and it is important to be careful about how you spend. Be frugal, you would be better off. Founders who understand things and can see beyond line do things differently. They keep their burn rate low and work hard to stay in the game for a longer period of time."

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Omar looks after Community and Business Development at Future Startup.

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