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The list of essential and unnecessary start-up expenses - Part 1

You’ve probably heard the old “you need to spend money to make money” cliché.

But let’s face it: when you’re starting a business, the mere idea of spending money makes your mouth dry and your palms clammy.

How do you know if you’ll be able to get your small business off the ground? How can you justify start-up expenses when you aren’t earning any money yet? How are you supposed to know how to manage your business start-up costs effectively? Shouldn’t you be pinching every penny for at least the first year?

We get it. Spending money before you’ve earned any feels counterintuitive. However, there are certain non-negotiable organisational costs involved in getting your new business off the ground.

Which ones are worth investing in and which ones should you put on the backburner? We’re breaking down both the essential and the unnecessary start-up expenses for you here so you can make the most of every single rand you invest in your small business.

Five essential start-up expenses

Let’s start with the must-haves. These are organisational expenses that almost every new small business will need to be prepared to invest in. These costs usually fall into two broad categories:

  1. Operating expense: regular day-to-day expenses required for running your business, such as insurance, payroll, rent, office supplies and more.

  2. Capital expense: bigger purchases or investments that become assets that benefit the business, such as equipment, a building, or a vehicle.

Those two types of expenses are treated differently for tax purposes, and you’ll likely have some start-up expenses in both buckets. But don’t wave goodbye to your hard-earned money quite yet, as we’re also sharing some tips and advice to help you minimise your start-up costs as much as possible.

1. Business plan

Starting a business without a plan is like trying to build a house without a blueprint.

What’s a business plan ? It’s a formal document that will cover the basics of your business, such as:

  • Description of your company, products and services

  • Market research to identify your ideal customer and potential opportunities

  • Competitive analysis to understand what similar companies you’re up against

  • Marketing and sales strategies to grow your business

  • Business financials and projections

It sounds like a lot, and it can be. Your business plan will require a significant investment in time, as well as in money, to get the information, resources and potentially even the help you need. But rest assured that it’s an expense that’s more than worth it.

How to keep your costs low:

Find a business plan template that can help you at least get the skeleton of your business plan sketched out.

Search for a small business mentor in your city, such as Seda which can help you on your business plan.

Contact Us for assistance with writing up your business plan.

2. Business permits, licences, and insurance

Groan. Sigh. Eye roll. Things like permits and insurance policies aren’t what many entrepreneurs’ dreams are made of. However, they’re crucial for ensuring your business is compliant and protected in case of unforeseen circumstances.

The vast majority of businesses (unless they’re operating as sole traders) will need to pay registration fees or filing fees to establish their official business entity with the Companies and Intellectual Property Commission (CIPC).

Contact us for company registrations.

The possible business entities you could establish include a:

  • Sole Proprietorship

  • Proprietary limited company (Pty Ltd)

  • Partnership

  • Company

  • Franchise

With your business entity set to go, many businesses will also need to spend some money on the appropriate and, such as a food licence or occupational licences. Exactly what you need will depend on your specific business.

Finally, a business insurance policy will require an up-front investment but will also give you some much-needed peace of mind. Again, the type of policy you need will differ from business to business. Many business owners opt for a general liability policy, but others might need product insurance or even property insurance if they have a bricks-and-mortar location.

How to keep your costs low:

Do your research. You don’t need every type of permit, licence, or insurance policy. Spend the time to find the right fit for your business so you can spend the money on what you need.

3. Equipment

You’re the business owner, but chances are good that you can’t get everything done with your own two hands.

To get started, you’ll need to invest in the necessary equipment. That could be something as simple as a reliable internet connection for your consulting business to something more complex like an automatic vehicle lift for your repair shop.

Depending on the type of business you’re starting, equipment can range from a modest to a hefty expense. But remember that, provided the equipment is something you’ll need for the duration of your business, it’s a worthwhile expense.

How to keep your costs low:

Keep an eye out for used equipment, which is often available at a cheaper price and helps you avoid the pain of major depreciation. Sites like Gumtree or Facebook Marketplace could have options for you, but make sure to ask plenty of questions and request documentation if necessary to ensure the equipment functions appropriately.

4. Accounting and legal expertise

There are plenty of daunting responsibilities that business owners find themselves facing, and things like tax, bookkeeping and legal issues are definitely on that list. Without the right professionals in your corner, it won’t be long before you find yourself tearing your hair out over complex jargon and regulations.

That’s exactly why finding and investing in an accountant and credentialed attorney is a smart idea—even when you’re just getting started. While there is an up-front cost associated with these professionals, they can actually help you avoid other unnecessary costs like fines, penalties and legal fees.

Contact us for Accounting Services

5. Website

When somebody first hears about your brand-new business, what do you think they’re going to do? They’re going to look you up online.

When they do, they should find your business website. This legitimises your business, gives you complete control over the information that’s being shared, and can help you secure more customers.

Creating a website can feel like an expensive and overwhelming undertaking, but rest assured that your first business website doesn’t need to have all of the bells and whistles. A simple website that includes the following pages will more than suffice as you’re getting started:

  • Homepage

  • About

  • Products and services

  • Contact

That’s really all you need as a brand-new business. Once you become more established and comfortable with your cash flow, you can invest in a more advanced and heavily branded site.

How to keep your costs low:

Use a drag-and-drop website builder like Wix. This type of platform makes it easy to create and customise a straightforward site with no design or development experience.

Connect with a university in your area to see if any web design students are looking for experience. You could benefit from their expertise, support their learning and get your website done at a reduced cost.


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