How much funding do you need?

Your business plan will determine how much money you need to develop your idea and take it to market.  You should consider initial costs and ongoing costs.  You should work closely with your accountant to ensure that you have considered all costs and that the investment is likely to be financially viable.

Initial Costs

Initial costs are those that you will encounter once, and include all costs up to the point of opening your business and selling to customers.  If you already operate a business some of these costs may not be needed or may be absorbed into the existing business.  Some of the main initial costs you will encounter include:

  • research and development costs
  • licenses, regulatory and permit fees
  • accounting, legal and other professional fees
  • equipment costs
  • initial advertising and marketing costs
  • bond for your premises
  • remodelling costs
  • fixtures and fittings
  • connection fees for telephones, lights, water, and other utilities
  • purchase of initial stock and supplies

Ongoing Costs

Ongoing costs are the expenses usually covered by your working capital. Often businesses fail to obtain enough funding to cover the expenses incurred during the initial months of business. It is important to remember that it may take 6-18 months before the business is at break-even stage. In this period you must maintain a cash balance to pay bills, debts and expenses as they arrive. Some examples of these include:

  • costs incurred in getting your products and services ready for sale (i.e. wages, manufacturing, production, packaging, etc.)
  • shipping costs and transport
  • rent or mortgage repayments
  • interest and loan repayments
  • wages and salaries
  • insurance
  • rates, electricity, gas, water (utilities etc.)
  • stock purchased for resale
  • petty cash
  • ongoing advertising costs
  • bad debts
  • slow payers
  • temporary staff.

It is useful to budget for a contingency of 10% of the total costs to cover unexpected costs.

Links to subsections of this topic

How much funding do you need?
What are the sources of funds?
What is the Optimal Funding Source for Your Needs?
Programs and Services