Most founders like to talk about their growth rate and monthly sales. But do they focus on their costs? Rather not. As long as more revenue (or investments) is coming than the amount spent, everything feels right. A regular look at the cost structure and a suitable forecast can be vital to survival. Underestimating regular or unscheduled expenses can quickly lead to imbalance or incapacitation.
What are the costs?
Of course, there are some obvious things like Domains, servers and license costs for software. Everything you need to do your core work, even if your startup may still be a side project. Then comes the typical running costs: office rent, electricity, food, drinks, snacks, office supplies and so on. Moreover, marketing and advertising, sales budget, travel expenses at appointments, fairs and conferences and everything to bring your product to the customer.
If your product is related to hardware then shipping cost, the handling of returns including labor and defective items are added. And eventually salaries, reserves, insurance, tax consultant, lawyer, etc. Even if you can not give everything to your accountant for copying, you may also need to include your own private expenses so you know what you need on a monthly basis.
Include every resulting cost factor
Even if it seems annoying and depressing, every cost factor that arises once can arise a second, or even third time. Documented for you clearly and comprehensibly, when and why, which costs have arisen and then already considered how you can prevent these costs in the future or at least keep low.
Incidentally, this also includes unnecessary extra work. Because also your working time causes costs. At least the lost time that you could not invest in the actual product.
Clear cost structure important factor for investors
The more clearly and accurately you know about the expenses of your startup and can provide information with numbers, data and facts, the more trustworthy you will become for investors. Especially if you have plans for various scenarios in your portfolio.
Who has the sharp pencil?
The regular employment with numbers, savings and cost overview is not always a good thing. Talk to the team about who takes over the task without anyone being overwhelmed. Especially in the initial phase, it should be clear that every euro that has not been spent can be invested in the product or in the acquisition of new customers.
Also published on Medium.