Many new business owners think they only need to account for their cash-flow needs up until the day they open their doors, but they need to think a bit beyond opening day. New business owners need to take a very close look at costs for the first 90 days their business is functioning. The reason for this: It takes at least 90 days to develop and build a reliable stream of revenue. If you don’t account for the first 90 days and have this cash reserve, you could be out of business before you even begin.

The amount of money you need — which varies from business to business — is called working capital. A one-person business, such as a computer or sales consultant, will have a much smaller working capital requirement than a retail store with inventory and three employees.

Let’s assume you own a specialty grocery store. You need to buy inventory, sell it and purchase replacement inventory. This all takes working capital. If you own a small furniture store and give customers 90 days to pay, once again you need working capital because you needed to purchase the inventory and then pay for it.

Before you open the doors of your business, think about the typical expenses you will have in addition to three months of rent and utility bills.

If you open a retail establishment, you need to advertise. Your advertising can be a combination of newspaper, radio or cable television ads; coupons; direct-mail pieces and flyers. Regardless of what method you use, allow enough money for advertising. Pay attention to your competition and plan accordingly before opening your doors.

Credit card fees
Credit card fees are usually based upon usage. The charges vary between 3 and 5 percent of your total charges. If you believe many customers will use their charge card to make a purchase, add at least 3 percent into the cost of the item. Be sure to interview companies that provide these services to find the best rate.

Delivery charges
Most companies charge for delivery. Be sure to account for this charge in the first 90 days of business.

Dues and licenses
There may be business organizations you want to join, or your community may require particular licenses in order for you to open your doors. For instance, if you are opening a restaurant and serve liquor, you will need a license.

Most likely you have borrowed money to open your new business and you are expected to make interest payments on your loan. As a business owner, you must account for these three payments for the first 90 days.

Office expenses and supplies
Regardless of your business, there are office needs such as printer cartridges, paper, postage, photocopy expenses, printing expenses, etc. They can add up because these supplies are constantly replaced.

Your employees need to be paid the first 90 days you are in business. Determine how many employees you plan to have and know what hourly rate you plan to pay. Once you multiply these numbers out, you will know what your payroll expenses are.

Payroll taxes
Payroll taxes can add up. They include the Social Security and Medicare taxes as well as the federal and state unemployment tax.

Your salary
Unless you plan to live off of your savings, you need to plan for 90 days of income for yourself. Determine before hand what your salary will be.

These are not the only expenses you need to consider before you decide to start a business. You will also need to account for insurance on your inventory or place of business, banking expenses for your accounts, repairs and maintenance on any equipment you own and most importantly, health insurance.

by Vicki Gerson

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