When starting a business, you don’t need millions to make millions. What you do need is a clear picture of your costs, writes Santam.

This is crucial as it will help you prevent cash flow problems later on. Please read on for Santam's best tips on how to get a better idea of your start-up costs and sticking to your budget.  

Arrange business expenses into lists

When you start a business, there will be one-off costs and continuous monthly expenses. The key thing is to look carefully at each individual expense, make an educated guess about the cost and separate expenses into the lists we detail below. After you’ve completed the items applicable to your business and guessed the amounts you’ll need, add up both lists, and the total of the two is the start-up costs you’ll need. Remember to prioritise what is absolutely necessary – i.e. electricity – versus nice-to-have (e.g. business cards).

List 1: Long-term assets

Business assets are the things you will need in your business over the long term, and also things that will retain some value. If you are offering a service, you might just need a desk, computer and website but if you are opening a store, you will need shelves, a table and a delivery van. If you are making things, list the ingredients or raw materials you’ll need. Phone around for quotes if you need to – e.g. ask rental agents about the typical monthly rent for business premises. Here are a few ideas of initial costs you will have:

• Computer equipment

• Software

• Phone(s)

• Security (gates, burglar bars, cameras)

• Equipment

• Office furniture

• Start-up inventory (stock)

• Shop fittings/signage

• Vehicles

List 2: Your monthly expenses

Next, list everything you will need to spend every month, for 6 to 12 months. This could include:

• Rent

• Loan repayments

• Electricity and water

• Phone connection and monthly bill

• Cellphone(s)

• Internet connection

• Salaries and wages

• Website hosting

• Equipment leasing/maintenance

• Advertising and marketing

• Insurance

• Fuel (if you do deliveries or are on the road a lot)

• Transport

• Office supplies (stationery etc.) and printing

The good news is that you can deduct the cost from your taxable income as expenses – check with your tax advisor.

Beware of these hidden costs

Once you’ve established your start-up costs, it’s also a good idea to keep some funds aside for any surprise expenses such as:

• Additional equipment and furniture

• Maintenance

• Machinery breakdown

• Customers paying late

• Interest charges on overdrafts

Support and funding

There are a number of government organisations that offer support to small businesses, for example:

• The Small Enterprise Development Agency (Seda) provides support services for small businesses such as how to write a business plan and how to grow your business. Look on their website for a local branch to get in-person advice.

• If you are under 35 years of age, you can get training in setting up a small business, advice and start-up funds from the National Youth Development Agency.

Source: Santam website

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