How to Start a Business with Limited Capital

Starting a new business is definitely an exciting time. But rushing to launch without a detailed understanding of the costs involved is bound to create problems.

Even if you only have access to limited capital, the cost of setting up a company doesn’t have to be enormous. Irrespective of the industry or business model, you can start operating and generating sales in hardly any time at all.

However, don’t make the mistake of underestimating business startup costs. With both one-off and ongoing expenses to consider, putting in place a comprehensive plan is the best way to avoid a financial disaster.
Here, we delve into the common costs of starting a company and highlight some strategies to ensure your business sets off on the road to success.

business startup costs

One-Off Expenses

One-off expenses are the initial business startup costs involved with getting your concept off the ground. 

The costs you encounter will depend on the nature of your new company. But there are several expenses that most businesses will experience throughout the planning process. 

Some of the following costs will be ongoing, but the largest investment is required from the get-go.

Office Space

Office space is bound to be a significant cost when starting a small business in Australia. While this is an unavoidable cost for many businesses, you should consider whether operating from home is the smartest financial decision in the short term. 

Commercial rents in Australia are typically priced at a dollar-per-square-metre figure. Naturally, prime locations with more space will be more costly than somewhere small on the outskirts of the city. 

For example, a premium commercial setting in Sydney CBD can cost $1,025 per square metre per annum, while an office on Melbourne’s outer fringe might be $460 per square metre per annum
In recent years, coworking spaces have become a viable solution for startups, providing flexible rental costs for smaller workforces. In fact, 82% of available spaces in Australia are those with fewer than 10 desks.

office space

Supplies and Equipment

You can’t provide services to the highest standards without having the right supplies and equipment in place. In many cases, this means investing in new work laptops for your team and paying for industry-specific software subscriptions. 

Buying supplies might also be as simple as having enough pens and paper. Make sure you don’t get caught without stationary when you’re trying to get things done!

You’re also going to need suitable office furniture – whether you work at home or in the office – to ensure you don’t experience any avoidable workplace injuries.

supplies and equipment

Licensing and Insurance

Complex rules and regulations impact the launch of new businesses in Australia, with every operation needing permission to get the ball rolling.

While some licenses and permits are free or quite affordable, such as applying for an ABN or registering a business name, others come with a considerable price. For example, it costs up to $512 to establish a proprietary limited company. 

Another substantial cost is insurance. Although some people choose to overlook this step, it could end up saving you thousands in the future. 
When determining your business startup costs, consider whether you need to add professional indemnity insurance, public liability insurance or product liability insurance.

Web Hosting

The cost of setting up a company will almost certainly involve paying for a website and its hosting. If you’re working with a tight budget, WordPress is a much-loved service that makes it easy to generate a web presence for a low price.

However, businesses that require something more substantial may have to pay for website developers and designers to implement a range of specialised features. If this outlay equals far more conversions, the extra cost upfront might quickly lead to dividends. 

If you only need a basic website, the cost might be less than $1,000. Yet a new e-commerce website stocking thousands of products might require $20,000 or more. Although your website will need to be updated in the future, most major costs will be upfront.

web hosting setup

Marketing and Promotion

You can’t attract customers without making them aware of your existence, which means you need to set aside cash for a marketing budget.

It can be tricky to know what kind of investment is required to get enough clients in the door. However, a good measuring stick is that 10% of your total revenue should be put towards your marketing.

This includes everything from getting some sharp business cards to eye-catching signs so your shopfront stands out to foot traffic.

marketing and promotion expenses

Ongoing Expenses

To figure out how much capital you need to start a business, you can’t overlook your ongoing expenses. These can be broken down into two broad categories: fixed costs and variable costs.

Fixed costs remain the same no matter the performance of the business, such as rent on factory space or property insurance. Variable costs adapt to the company’s productivity, like commissions paid to a sales team or the cost of shipping products to customers.

Aim to have six months of ongoing expenses saved before launching your venture. Supported by a detailed business plan, you can tame your running costs from the start.

ongoing expenses fixed variable costs

Staff Salaries

Before you decide to hire a talented workforce, you need to make sure you have the funds to pay them. However, don’t mistakenly think that the only relevant factor is their hourly rate or yearly salary.

Australian law dictates that employers are obligated to pay for a range of staff entitlements, including superannuation, holiday leave, sick leave, public holiday pay and insurance. 

These extra costs can add up significantly, so make sure you understand the total cost of your employees when planning a new business.

staff salaries

Lawyers and Accountants

With so many different laws and regulations around operating a business in Australia, having a good lawyer by your side can make all the difference. Yet these fees can quickly get out of hand without the right approach. 

It makes sense for a startup to approach a lawyer with fixed rather than hourly fees, as you’ll know the exact cost involved. To save time and money, be sure to engage a lawyer with precise business objectives and priorities in mind. 

Likewise, a skilled accountant can be worth their weight in gold. They can assist with revenue forecasts, financial strategies and highlight cash flow concerns, while also looking after your unpaid invoices and tax obligations. 

With typical accountancy fees ranging from $1,000 to $5,000 per year, remember to budget accordingly.

Managing Inventory

Ordering, stocking and replenishing goods for your business is another big cost that startups have to factor into their plans. You must determine what it costs to store your products, plus any transportation fees, insurance and taxes required.

By having a solid understanding of demand forecasting, you can make sure you keep the right amount of stock on hand. Meanwhile, avoid keeping deadstock on hand, as it takes up space and reduces cash flow.

managing inventory

Boost Your Startup with First Page Australia

Once you’ve carefully planned out how to start your small business in Australia, get in touch with the experts at First Page Australia for all your digital marketing needs. 

We’ve led highly successful campaigns for thousands of startups in Australia and overseas, ensuring we have what it takes to reach your customers and achieve your business objectives.

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