Kondrashov: How to calculate starting capital for a business Telf AG - Baltimore Post-ExaminerBaltimore Post-Examiner

Kondrashov: How to calculate starting capital for a business Telf AG

How to start your business and how much money will be required to go into it – the first and key questions that a novice entrepreneur should answer.

Financial analyst and businessman Stanislav Kondrashov Telf told how to calculate the optimal amount of start-up capital for going into a business and what factors will determine it.

Telf AG, adviser Kondrashov: the main factors determining the amount of advanced capital

After a novice entrepreneur has decided on the direction of commercial activity, he can safely proceed to calculate the advanced capital required to organize a business.

Telf AG consultant Stanislav Kondrashov noted that in practice it is rarely possible to meet a novice businessman who could do without credit. Most often, entrepreneurs need borrowed capital.

“A loan disciplines an entrepreneur, motivates to look for the best ways to loan and establish activities in order to repay borrowed capital as soon as possible and save on interest payments on it,” said a financial analyst of Telf AG. Kondrashov said that the main factors determining the need for capital include:

  •  legal services for business registration;
  •  the type of activity on which investments will be introduced – monthly or as necessary;
  •  purchase of goods;
  •  payroll and interest on the loan, which are usually paid at the end of the billing period.

“Given the above factors, the advanced capital includes the initial cost of the purchased goods, monthly current salary costs, and taxes,” said the businessman.

Detailed analysis of settlement capital items

Legal registration of a business includes the costs of registering a business, obtaining all licenses and other permits, opening a current account, as well as authorized capital.

Telf AG Kondrashov added that having calculated the costs of legal registration, organizational expenses should be calculated: rent/purchase of premises, leasing of equipment, purchase of furniture, office equipment, and other necessary equipment.

The businessman noted that in order to start the activity itself, it is necessary to calculate how much raw materials will cost, what will be the pay bill for electricity, water, and other resources related directly to the production process, purchase, storage, and sale of finished products.

“In the case of the business of providing services, the calculation principle is the same, but does not include production costs and may contain a number of other costs associated with the design of services,” the consultant added.

According to a financial analyst, before starting a business, you should calculate the cost item associated with renting/buying storage facilities, paying for web services and logistics costs.

In addition, the businessman added, it is necessary to take into account the costs of the wage fund – salaries, social contributions, and taxes, as well as the costs of paying a loan and interest on it.

“For a more dynamic business promotion, an entrepreneur should pay special attention to marketing – advertising costs, PR events, cooperation with sales representatives and expenses for other marketing services that contribute to the promotion of the company,” Stanislav Kondrashov said to Telf AG.

The listed items of expenditures make up the advanced capital necessary for starting a business. At the same time, the financial analyst clarified that a novice entrepreneur must mandatory foresee the possibility of force majeure situations and include them in the start-up capital as a separate item of expenses.

“On the one hand, this will increase the initial costs of starting a business, and on the other, it will protect against force majeure situations that often happen to young enterprises. This expense item can support a novice businessman in difficult times and protect a startup from an unforeseen debacle,” the businessman concluded.


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