WHEN IT COMES TO STARTUP COSTING IT’S ALWAYS A TROUBLE!!
There are two predominant ways:
–a pragmatic “engineering” approach, full of technical terms and sometimes very poor when it comes to the financial figures;
–an accounting approach way, very keen and careful with excel papers, and sometimes very complicated
Truth (and affectivness) as most of the times lies in the middle.
- at the very beginning don’t use a overcomplicated worksheets. Start with a reasonable list of costs a typical business may incur when starting up.
- spend some time removing and adding rows, defining two simple and clear lists: a) General /generic costs: those that almost every startup has, whatever is its mission. Probably it’s a good exercise because those are either:
- COST YOU CAN REDUCE;
- COSTS YOU CAN SHARE WITH OTHER PARTNERS;
- COST WHERE INVESTING TIME IN SELECTING A LESS EXPENSIVE SUPPLIER IS WORTHY OF THE MONEY/TIME YOU INVEST
b) highly specific costs: it’s only you who have those costs, they are really AND STRICTLY connected with your business model because that’s in the end not a cost it’s money invested to boost the uniqueness of your startup idea. Invest time in explaining their relevance in the business plan and briefly also while you are pitching: sometimes, those involve a careful choice of suppliers, sometimes they represents a kind of bottleneck because you have no choice, but that supplier/partner is hard to manage because of its power.
- never forget to enter/make clear the financial year at the top of every sheet (year 1, 2, 3 perspective)
A) 2P2L costs:
In other words, write down carefully costs for obtaining the necessary patents, permits registrations and license, and the costs for developing naming, logos and branding activities. If you work hard on your startup uniqueness, you don’t want your idea or your logo (or both) being spoiled by a competitor
B) RISKS costs: i. Insurance & liability costs: this side is most of the times not well explain/explored by startuppers, assuming is not relevant or that will come in future, but it may heavily affect your busines
C) TRAINING AND HR: let’s be clear. Unless you have a prototype what’s the asset value of your startup? Mainly it’s about people and the… content of their heads…so how much is f.i your academic backgroup worthy, how much money need to invested in keeping updated your company’s key people distinctive know how and core competencies? Have an idea of a 3 yrs training plan.
D) BACK OFFICE & INFRASTRUCTURE: no work can be done without a proper infrastructure/equipment : Rental lease cost; Utilities, internet connection, business continuity, software, specific hardware, instruments etc etc need to be assessed? F.i. do they compulsory need to be yours or can be leased? That will definitely change your costs worksheets
E) SALES & MARKETING: products and services don’t have legs: they need a marketing and sales plan to be delivered and accompanied to market. Be careful to give an idea of such costs, including training sales agents, or doing an advertising campaign or taking part to specific trade fairs and printing, communicating, spreading commercial flayers or the like.