Business Setup Calculator
Business Setup Calculator helps with budgeting, securing funding, and avoiding unexpected costs in the early stages of launching.
What is a Business Setup Calculator
A Business Setup Calculator is a tool that helps entrepreneurs estimate the costs involved in launching a new business. It factors in various expenses such as legal fees, registration charges, office rent, equipment, staffing, and other overhead costs.
The calculator provides an estimate of the total startup costs required to run a business for the initial months or years. This can be useful for entrepreneurs seeking funding or investors, or those evaluating if they have enough resources to get started. Some calculators may also offer additional resources like guides or checklists to assist with the business setup process.
What is the GTS Business Setup Calculator
How much money do you need to launch and run your business? From covering employee salaries to keeping operations running smoothly, breaking even, and making a profit, how much capital is required?
An online tool called GTS’s Business Setup Calculator helps both novice and seasoned business owners find the answers to these important concerns. Because of our vast expertise dealing with startups, we are aware of the difficulties in raising capital to launch and expand a company. With this calculator, we hope to inspire and encourage business owners as they realize their aspirations.
The GTS Business Setup Calculator also helps forecast annual expenses and savings, taking into account both fixed and variable costs. It can assist in evaluating pricing strategies, ensuring the business can break even or generate profits.
With its user-friendly interface, this tool makes it easy to estimate startup costs, calculate potential profits, and guide you towards successfully launching your business.
How to Use GTS’s Business Setup Calculator
GTS’s Business Setup Calculator acts as a company valuation tool, considering various costs involved in setting up and running a business, including capital, operational expenses, and revenue projections. Here are the six steps to use the calculator:
1. Provide Personal Information – Enter your personal details, such as your name, contact information, preferred language of communication, and the name of your startup.
2. Provide Business Information – Enter business-related information, including the industry you’re in, and the primary and secondary activities of your business. This helps determine the licenses and registration requirements, along with associated costs.
3. Enter One-Time Capital Expenditure – Provide details of one-time capital expenditures, such as security deposits, infrastructure costs, compliance expenses, and incorporation fees.
4. Enter Operational Expenditures – Include your monthly recurring operational costs, such as rent, payroll, insurance, utilities, GST filings, and other regular expenses.
5. Estimate Revenue – Estimate your business’s revenue by providing information on average sales per unit, monthly sales, and expected income. This will help forecast how long it will take to start generating revenue.
6. Get the Final Estimate – After inputting all the information, the calculator will provide an estimate of your total setup cost, the cost for the first month, and the number of months required to break even.
This user-friendly tool gives you insight into the financial required to make your entrepreneurial journey successful and assists you in estimating the expenditures associated with launching your company.
One-Time Expenses
One-time expenses are the initial costs you’ll incur when starting your business. These expenses are typically non-recurring and can include:
1. Investigatory Costs (₹100 – ₹10,000+) – These costs include market research, feasibility studies, and other investigative work required before launching your business. If done independently, costs may be as low as a few hundred rupees, but hiring a consultancy can increase costs to tens of thousands.
2. Registering Your Business (Starts at ₹5,000) – The cost of registering your business depends on the type of company you’re starting and the state in which you’re registering. On average, self-registration will cost around ₹5,000. However, many opt for online services to handle the process, which may add to the cost.
3. Permits & Licenses (₹3,000+) – To operate lawfully, you could require particular licenses or permits, depending on your industry. These could consist of liquor licenses, business licenses, or permits for handling food. The location and nature of your firm will affect the price. To find and apply for the required permits, you might occasionally need to enlist the assistance of experts.
4. Domain Name and Website (₹0 – ₹2,000) – To establish an online presence, you’ll need a domain name and a website. A domain typically costs around ₹2,000 annually, and the cost of web hosting and design varies based on your needs. You can reduce costs by building your own website using platforms like WordPress or other CMS options.
5. Expert Fees (₹0 to ₹5,000) – To help with particular setup chores, you might need to hire experts like consultants, attorneys, or accountants. The services needed and the going rates in the area will determine the final cost.
6. Supplies & Equipment (₹10,000–100,000) – You’ll need to buy materials and equipment if you’re launching a physical business. Printers and other small devices can be purchased for a few thousand rupees, but larger machinery or equipment may cost tens of thousands to lakhs of rupees.
These one-time expenses are essential to getting your business up and running and should be factored into your initial budget planning.
Ongoing Expenses
Once your business is up and running, you’ll incur ongoing expenses, which include both fixed and variable costs:
●Fixed Expenses: These are regular, predictable costs that remain consistent every month, such as rent, salaries, insurance premiums, and utility bills.
● Variable Expenses: These costs fluctuate depending on your business’s activity or usage each month. Examples include raw materials, commission payments, shipping costs, and marketing expenses.
Managing both types of expenses is crucial for ensuring your business stays financially stable as it grows.
Fixed Costs
Fixed expenses are those that remain constant each month, regardless of how much your business uses or produces. These typically include:
1. Office Space (₹300 – ₹1,000 per month) – Office rent is often one of the largest fixed costs. The cost varies based on location, office size, and the amenities you need. If you’re starting small, working from home or a coworking space might be sufficient. However, as your business grows, you’ll likely need to rent a dedicated office space.
2. Utilities (₹100 – ₹5,000 per month) – Utilities cover the cost of essential services like electricity, water, and waste disposal. These expenses can be higher depending on your office’s size and the nature of your business (e.g., if you have a manufacturing facility).
3. Payroll (15% – 30% of the budget) – Employee salaries are a significant ongoing cost. In addition to wages, you must account for payroll taxes, benefits, and other employee-related expenses, such as workers’ compensation insurance.
4. Insurance (₹500 – ₹2,000 per year) – Business insurance is essential to mitigate risks. Depending on your business type, you may need property insurance, liability insurance, or other specialized coverage.
5. Professional Services (₹500 – ₹5,000 per year) – You may need to hire experts such as accountants, lawyers, or business consultants for specialized services like tax preparation or legal advice. These costs are typically fixed, even though these professionals are not on your payroll.
6. Technological Expenses (₹500 – ₹10,000 per month) – Technology costs include website maintenance (design, hosting, domain registration), CRM systems, and productivity tools like Google Suite or Microsoft Office. If you run an online business, you may also need email marketing services like MailChimp.
7. Loan Repayments (₹0 – ₹10,000 per month) – If you’ve taken out a loan to finance your business, you’ll need to make monthly repayments. The amount will depend on your loan terms, but it’s important to include this in your monthly budget.
Variable Costs
Variable costs are expenses that fluctuate based on your business activity. As your sales increase, these costs will rise, and as sales decline, they will decrease. Key variable costs include:
1. Product and Inventory Cost – (20% – 60% of total revenue)
This includes the direct costs involved in creating your product (or cost of goods sold – COGS). It covers labor, storage, shipping, supplies, and packaging. For physical products, inventory costs are also included. If you offer services, the variable cost would involve materials required to deliver the service. For software-based businesses (e.g., SaaS), it includes the cost of developing and maintaining the software.
2. Marketing and Advertising (5% – 30% of budget) – Attracting customers is critical for growth, but it can also be one of your most significant expenses. Costs include market research, branding, website development, and various forms of advertising (online, print, social media, etc.).
3. Customer Service (5% – 10% of budget) – Providing quality customer service is vital, especially for new businesses. This includes the costs of support staff (whether phone, email, or live chat) and any tools or systems you use to manage customer inquiries.
4. Returns (2% – 4% of budget) – Most businesses will face returns due to defective products, customer dissatisfaction, or changes in preference. You’ll need to account for both the shipping cost of returns and the cost of handling these returned items.
5. General and Administrative Costs (2% – 5% of budget) –These are the ongoing administrative costs such as office supplies, furniture, printing materials, and other small expenses that add up over time.
6. Outsourcing Costs (₹0 – ₹5,000) – Many businesses outsource tasks such as bookkeeping, customer service, or content creation. Outsourcing costs can be low if hiring freelance contractors from platforms like Fiverr or Upwork, but they can increase if you hire full-time or specialized help.
7. Taxes – Depending on the type of business, you may owe various taxes. For instance, property taxes if you own or rent physical premises, sales tax on products, or self-employment taxes. Make sure to account for these in your budget, as they vary based on location and business type.
These variable costs will change as your business grows or fluctuates in activity, so it’s essential to regularly monitor them to maintain profitability.
Break-Even Point Formula
You can use the Break-Even Point calculation to figure out how many units of a product you need to sell to pay for all of your variable and fixed expenses. The formula is as follows:
Total Fixed Costs / (Unit Sales Price – Variable Cost per Unit) = Break-even Point (Units to be Sold)
● Total Fixed Costs: The sum of all fixed costs (e.g., rent, salaries, insurance).
● Unit Sales Price: The price at which you sell one unit of your product.
● Variable Cost per Unit: The cost incurred for producing one unit of your product (e.g., materials, labor, shipping).
This formula calculates the number of units you need to sell to “break even” — meaning your revenue from sales covers your expenses, with no profit or loss.
● Total Fixed Costs: ₹50,000 (rent, salaries, utilities, etc.)
● Unit Sales Price: ₹500 (the price you sell each unit for)
● Variable Cost per Unit: ₹300 (the cost to produce each unit, including materials, labor, etc.)
Now, we can use the Break-even point formula:
Break-even point (Units to be sold)= Total Fixed Costs/Unit Sales Price−Variable Cost per Unit
Break-even point (Units)= 50,000/500−300
Break-even point (Units)= 50,000/200
Break-even point (Units)=250units
You need to sell 250 units to cover all your fixed and variable costs. After selling 250 units, any additional sales will result in profit.
Advantages of Using a Business Start-Up Cost Calculator
● Operating Income – You can divide your money into four categories in this section. For instance, you can track the revenue from basic sales and customisation separately if you sell mugs and charge extra for a customized print.
● Non-Operating Income – This includes secondary sources of income that support your business, such as interest from bank deposits or grants and donations your company receives.
● One-Time Costs – Only fill in this section if you’re in the process of launching your business. One-time start-up expenses cover items like furnishings, equipment, initial marketing efforts, and the cost of building your first inventory.
● Salaries – Salaries are listed separately because you may want to break them down further to account for employee benefits or commissions.
● Monthly Expenses – This category includes any ongoing costs you expect to incur as part of running your business. These expenses—such as rent, utilities, insurance, leases, travel, and office supplies—will reduce your monthly budget balance.
What Are Online Business Start-Up Costs
Start-up costs represent the total expenses incurred when launching a new business. Since every business is unique, the types of start-up costs will vary. Online businesses have different needs compared to brick-and-mortar ones, much like a coffee shop has different expenses than a bookstore. However, certain costs are common across most business models.
● Business Planning – A business plan, which serves as a detailed blueprint for your new company, is essential in the start-up process. It requires you to account for various initial expenses. Failing to accurately estimate online business start-up costs can lead to inflated profit projections, which can be detrimental for any small business owner.
● Research Costs – Before launching a business, conducting thorough market and consumer research is vital. Many entrepreneurs hire market research firms to assist with this evaluation process, ensuring they have a clear understanding of the industry and target audience.
● Borrowing Costs – Capital is necessary for any firm to launch. Funding can be obtained in two main ways: debt financing and equity financing. Since they don’t usually issue stock or shares like larger companies do, the majority of small businesses choose to finance themselves through debt. Loans and credit lines, which have their own fees and interest rates, may be used for debt financing.
How to Calculate Business Start-Up Costs
Calculating the start-up costs for a small business involves careful research and accurate calculations. Follow these five steps to determine your business’s start-up expenses:
● List Your Expenditures: Outline all initial and anticipated ongoing costs.
● Calculate Your Expenses: Research average costs for each item, including registration, licensing, equipment, and supplies.
● Categorize and Do the Math: Separate one-time and ongoing expenses, and calculate monthly costs leading up to your launch.
● Include a Cushion: Add extra funds to account for delays or unforeseen issues, ensuring enough cash flow for the first year.
● Finalize Your Numbers: Review and adjust your calculations, considering both fixed and variable costs, and include the start-up expenses in your business plan to support funding applications.
How to Identify the Break-Even Point Formula Using the Business Start-Up Cost Calculator
Businesses can use the break-even point method to calculate the amount of income required to pay all expenses without turning a profit or losing money. It essentially illustrates the sales threshold at which your company will be able to pay for both fixed and variable expenses.
A business can exist and pay its startup costs at the break-even point, but it will not make any money. This formula determines how many units must be sold overall at a certain price in order to pay for these expenses.
The break-even formula helps you balance total revenues against total expenses, so you can use it to determine when your organization will start making money. The formula is an essential tool for figuring out how much sales are needed to turn a profit.
FAQ
Calculating start-up costs is a critical step when launching a new business in India. These costs encompass expenses such as office space, equipment, raw materials, marketing, and salaries. By understanding your start-up costs, you can:
• Plan Your Budget: Get a clear picture of the funds required to start your business.
• Secure Funding: Present accurate financial details to potential lenders or investors.
• Manage Finances Effectively: Keep track of your spending and maintain financial control as your business grows.
To get a detailed breakdown of your start-up costs, reach out to GTS and use our business setup calculator for more insights.
Depending on the size, location, and type of business, the typical start-up cost for a small business in India might vary significantly. Start-up expenses typically fall between ₹2 lakh and ₹5 lakh. This is only an estimate, though, and your actual expenses may differ based on your particular business needs.
There are several methods to determine the value of a business, depending on the purpose of the evaluation. A common approach is to assess the company’s tangible assets and current liabilities. This can provide a basic estimate of its worth.
To simplify the process, GTS offers a business setup calculator that allows you to calculate the value of your business easily. By simply entering your personal and business details, you can get an accurate valuation tailored to your specific circumstances.
• Legal and Professional Fees: Incorporation, permits, licenses, legal and accounting services.
• Equipment and Supplies: Computers, office furniture, machinery, and tools.
• Office or Retail Space: Rent or lease for business premises.
• Inventory: Initial stock or materials for product-based businesses.
• Marketing and Advertising: Website, campaigns, ads, and PR efforts.
• Employee Salaries and Benefits: Wages and employee benefits.
• Insurance: Liability, property, and worker’s compensation coverage.
• Utilities and Operational Expenses: Rent, utilities, phone, and internet costs.
Yes, you can deduct business startup costs in the year you start your business, even if you haven’t generated any income yet. However, if your startup costs exceed a certain threshold (typically $50,000), you may need to amortize (spread out) the deductions over several years instead of deducting them all at once.