The Cost of a Startup Business
According to online data, Singapore is currently home to around 4,000 tech startups. These are often small businesses founded by innovative entrepreneurs who want to offer new products or technology in the market. Unfortunately, having a groundbreaking idea does not automatically equate to securing funding.
Breakthroughs require funding and setting up a business is costly. Intention and inspiration can only get you so far. Even if you are the hardest worker in the room, this will not guarantee that you will be successful.
To address the risks that come with setting up a startup, you will have to be strategic with your moves. Here is a list of things you need to consider before taking that leap of faith and embracing the life of a startup founder:
- Research On Expenses
Setting up a business is not an everyday task or an ordinary project. This is especially true if your startup will center around technology. You will need to gather information about your products and services. You will also need to gather information on the logistics of your business operations.
Needless to say, you will need reliable and updated data. You cannot rely solely on information readily available on the internet. You might need to search for reputable sources and credible subject matter experts.
- Incorporation Fees
Once you have a clear picture of what you want to do or the products and services you want to offer, another major consideration is your business structure. Would you be a sole proprietor or owner? Do you want to set up the business with friends or colleagues? Do you want to set up a corporation or will it be just under your name?
Research and learn more about the differences between various types of business entities. Schedule a visit to the Accounting and Corporate Regulatory Authority (ACRA). This is the government agency that regulates businesses in Singapore and maintains the company registry. Ask about fees so you will know how much you need to prepare for your business.
- Office Space Rental and Equipment
Although a lot of businesses nowadays do not go the traditional route of setting up a fully functional office, it’s recommended that you have a place where you can work, and meet employees and clients. A dedicated space is still crucial in ensuring that you can get your tasks and projects done.
Consider co-working spaces if you do not have employees yet or if you have a small team. This can significantly reduce the amount of overhead costs. Most of these spaces also offer the use of basic office equipment such as printers, projectors, speakers and even coffee machines.
- Employee Salary
While you are starting, it is advisable to keep costs at a minimum. Presumably, you are still looking for regular clients and most of your effort would go to introducing your products and services. This is a phase where it is important to be mindful and careful about how many people you hire. You need to decide whether you need full-time employees or you can get by with part-time employees for the time being.
Research about labor laws and regulations to make sure you are fully compliant. As a rule of thumb, it is best to treat everyone, employees and clients alike, with kindness and professionalism. After all, you are building a reputation for your business and it would not be beneficial to start on the wrong foot. First impressions last and you would naturally want to be known as a good employer and an exceptional service provider.
How to Get the Funding You Need
Some people rely on their savings when setting up a business. While this may be ideal, you will soon find out that your savings are not enough to cover the costs. You will get stuck if you do not purchase the equipment you need. It would be a waste of time if you cannot proceed with selling your products just because you cannot afford a nice website.
The answer to your worries? Look for a registered money lender that can provide the funds you will need to take off. To increase your chances of getting your loan approved, take note of the following:
- Create a Business Plan and Come Up With A Budget
You cannot set up a business without a plan. You should know by heart what your business is about and what you are trying to offer. You should also have a budget.
It could be as basic as a running list of things you need to buy or pay for to get the engine of your startup up and running. However, it’s better to have a detailed projection of expenses in the next 12 months. Whatever you choose to do, what is important is to come up with a plan.
- Evaluate What Types of Loans You Need
Depending on your projected expenses and income, you will be able to assess what will be your paying capacity in the next 12 months. This is essential in deciding what types of loans to avail of, how much you need to borrow and whether or not you can get by with an unsecured loan or you need a mortgage.
- Research Lenders and Compare Terms
Make sure to research your potential lender before you sign anything. Ask your family and friends if they know a reputable lender who can help you with the funds you need for your startup.
Read the terms and conditions of the loan agreement carefully. You would not want to miss the fine print. Ask as many questions as you need. Do not get intimidated by complex-sounding terms. Have your potential lender explain it to you in words you will understand.
- Prepare Your Business Documents and Other Requirements
Once you have decided on who to borrow money from, ask for a list of all the documents you will need to submit. This will be your checklist to ensure that you do not miss anything. Being well-organized will also send the right message to your potential lender.
Since you are just starting your business, there might be some requirements that you are yet to secure like income tax returns for your business or financial statements. Keep the communication channels with your lender open so they can advise you on what documents to submit.
Conclusion
If you think you are ready for the world of startups, it’s time to tackle the challenge of funding. While you can use your savings to initially fund some expenses, eventually, you will need to ask a lender for funding.
The challenge of convincing a lender to approve your loan application will be a good exercise. It will provide clarity on whether or not you are ready to be a startup founder.
