Even before the formal foundation of a business, you need to calculate start-up costs that will be incurred. These founding costs include, for example, expenses for a foundation or a professional market study. Start-up costs are usually written off relatively quickly and have to be pre-financed by start-ups.
In addition to the start-up costs, investments are also added on the way to self-employment. Investments include, for example, the acquisition of of a machine or the conversion of a shop.
Distinguish between start-up costs and investments
Depending on the complexity of your business model, you spend before you start up. For example, it may make sense to have a sound market analysis prepared by an external consultant who evaluates the market potential. Or you can go to trade fairs to get to know potential suppliers. The expenses for these so-called start-up costs are usually incurred before the formal foundation and must be financed in advance by you privately. Also the costs for the formal foundation e.g. notary costs or the costs for the business registration are counted among the foundation costs.
Start-up costs are usually expenses that do not directly affect the company’s earnings. Accordingly, start-up costs are usually written off relatively quickly, often directly in the first financial year.
In contrast to the start-up costs, investments are normally made only after the formal legal foundation. Investments are expenditures necessary for the start of the company and should have a positive impact on business in the longer term.
Expenditure on investments usually exceeds the start-up costs significantly and is therefore paid by the company, e.g. by the GmbH, the GbR, etc. Most investments are accounted for – i.e. they are in line with the end of the financial year the balance sheet – and are depreciated for several years, depending on the deduction for wear and tear (Depreciation).Tip
Ask your tax advisor before you set up your tax advisor what tax aspects you should consider in terms of start-up costs and investments. A tax advisor can be found here!
Calculate start-up costs and investments
An essential element in determining all the capital requirements required for the start-up phase is the cost of start-up costs and expenditure on investment. For the calculation, you can also distinguish between start-up costs and investments:
- Administrative start-up costs: Administrative costs include legal fees, filing fees for patents, business filing, etc.
- Business plan related start-up costs: Don’t forget start-up costs for start-up coaching, market research & analysis as well as consulting fees!
- Investments in production: Most of the largest expenditures are investments in real estate, furnishing (e.g. shop), vehicles, materials and stocks.
- Investments in the product: Investments in product development and design as well as material costs etc. are absolutely necessary and often relatively expensive.
- Investing in marketing: A professional presence is a must – think of investing in your own website, which Corporate Design (logo, business documents, etc.) as well as marketing material (business cards, flyers, etc.).
- Investments in business equipment: Various investments are also incurred in the business equipment: office equipment, telephone, etc.
- Brokerage costs: Although brokerage fees are not direct investments, the costs are not negligible. In particular, consider fees for real estate agents and recruitment agencies.
To help you calculate start-up costs & investments, we have developed a free tool that allows you to here downloadable.
Where can you save on start-up costs & investments?
There are a number of ways you can use your budget more efficiently for your start-up. Consider the following cost-effective alternatives to reduce investment and start-up costs:
- Business form: Instead of directly setting up a limited liability company, you can use the lower-cost version to start.
- Brokerage fees: You should try to negotiate the brokerage fees. If you don’t want to pay brokerage fees, you can try contacting the administrations directly.
- Incubators & office communities: Take advantage of existing infrastructure of an incubator. This cost-effective alternative to owning an office also offers a number of advantages for non-founders (network, bookable and canbe annus at short notice, good location, meeting rooms, etc.).
- Used goods: office equipment, equipment, equipment, machinery, etc. cost much less (usually only about 1/3 to 1/4 of the new value) if purchased used. This significantly reduces the level of investment.
- Leasing: Take advantage of meaningful forms of financing. through leasing for example, you can significantly reduce investments in vehicles, machinery, and equipment.
The goal is …
… that you list the costs of starting a business transparently in your business plan. Ideally, you distinguish between start-up costs and investments.
Since the start-up costs are incurred before the formal foundation, you should discuss this point with your tax advisor. In terms of investments, there are a number of options for saving costs and reducing your capital needs. Here you can score readers with sensible, cost-effective alternatives, especially in the business plan.
The cost of start-ups and investments are the first important part of capital requirements. The second is calculated on the basis of the running costs, which you can use in the next chapter of the financial plan will work out.