what is startup

What are Startup Costs?

Learn about Start-ups with Imran Khan
Break Ke Baad 2010

The scene shows the journey of Abhay Gulati (played by Imran Khan) who starts to cook for the joy of it. Later, he decides to charge money for the delicious food that he is making. His friend recognizes this talent and decides to give him a space to begin his startup along with his other friend.

In this blog, Learning Perspectives will explore the meaning of start-up.

What are Startup costs?

Startup refers to the initial stages of the business. Similar to the scene we saw, Abhay is shown in the beginning stages of his start-up restaurant. Every startup’s journey is different yet the majority of them look for funding for their business.

Venture capitalists and angel investors, generally help during the startup process. These companies may not have a solid business model and lack funding. Many of these companies are self-funded or receive initial help from friends and family. As the startup progresses, a clear vision from the founder is required for the business.

Understanding your location and the legal structure of the business is crucial too. There are three types of legal structures that the founder can opt from. These are sole proprietorship, partnership, or corporation.

A sole proprietorship is the easiest to set up. This can be done just with two identification proofs. A partnership is a viable option when there is a joint venture between two or more parties.

Location is an important decision as well. Nowadays many companies start online. According to the nature of the business, some startups might have to start their online stores as well.

Initial costs for a startup include research expenses and business plan formulations. Abhay initially starts monetizing the food with just a table and puts a small banner on it namely “Ghar ka Khaana” (Homemade food).

YouTube video
Understand Startup Costs with a Video

One also needs to determine some recurring costs of the business. For example, a recurring cost for a restaurant business could be kitchen rent, food costs, electricity, water, and gas bills.

However, non-recurring costs are those costs that happen once in a while. These can be purchased chairs or tables or equipment for the kitchen or ambiance etc.

As the business grows, costs begin to change. Many different types of costs appear such as the hiring of new chefs/labor, marketing of the business, and training costs. All these costs need to be forecasted so that there are no surprises later in the business.

CostsPercentages
Rental Cost of the business5-10%
Employee Costs25-30%
Marketing8-10%
Cost of food sold20-40%
Minimum Restaurant Costs

Above are assumed figures based on research of various restaurants in a locality. An important aspect is that all businesses are different and their journey would be different. For example, in the above scene, Abhay’s friend offers her the Kitchen to start the business.

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