Estimating costs and income is key for any new business, whether you’re a fast-moving start-up or still weighing the pros and cons of chucking in the day job.
These numbers will help you decide if your business is viable or not, and show you a quicker path to breaking even and long-term profitability.
The amount of money it takes to start — and to stay in business — will vary greatly from business to business. This page sets out common steps to work it out.
Overstate rather than understate your estimates.
It’s a good idea to add 20-30% for costs you haven’t thought of — unforeseen bills or price rises can quickly add up.
To help predict your income, use data on your industry type and your competitors.
Another good way to get an idea of profits and costs is to talk to businesses similar to your own. You’ll be surprised how open certain competitors might be to sharing their experiences.
Stats NZ and Inland Revenue have a range of tools to dig into financial data for your market and your competitors.
© 2017 BUSINESS.GOVT.NZ How much money do you need to start a business?
When starting a new business, think hard about the likely costs before you pass go. This will help you avoid expensive surprises.
Can you afford it?
Assessing whether you can afford to start a business takes careful consideration. The first thing you should do is analyse your own expenses.
Go through your personal spending with a fine-tooth comb. Add up your mortgage or rent, bills, food, school fees and discretionary spending.
Look for things you can cut. Add up the items you can’t to work out the least amount of money you need to sustain your lifestyle.
Running a business can be incredibly fulfilling, but the early days in particular can be a financial squeeze. Being realistic and honest with yourself from the get go will help you avoid financial disaster.
Questions to ask yourself before you start
Is your business idea viable?
Find out how much money you’ll need to get started and to keep the business running.
Not everyone can afford to start a business immediately. But if you know your idea is viable, then you can start to build your business case straight away.
Just keep in mind that starting a business generally costs