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Case Study: Figuring Business Costs for the First 90 Days

Filed under Financing a Startup. Fact checked on May 24, 2012.

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Our case study of a ficticious sandwich shop outlines many of the expenses you are likely to incur during your first three months of operation.

Suppose you have a sub sandwich shop located in Cedar Rapids, Iowa. Here's a look at the cash you'll need in the first 90 days of operation. For a look at the cash you'll need to get the shop off the ground, using the same example, see our case study on startup costs.

Working Capital Dollars Needed
Advertising $600 Budgeted newspaper and shopper ads at $200 a month
Bank service fees $100 Not a significant fee in this type of business
Credit card fees $0 Credit cards won't be accepted, at least initially
Delivery charges $0 Amount included in inventory costs
Dues and subscriptions $50 Trade magazines for analyzing restaurant trends
Health insurance $0 Employ retirees and high school kids who do not need insurance
Insurance $1,450 All business insurance including worker's compensation
Interest $1,500 Loan for $60,000 at 10 percent interest for 90 days
Inventory $1,000 This is an expansion of food inventory
Lease payments $900 Oven leased at $300 per month
Loan payments $0 Interest only due the first 90 days
Miscellaneous $1,000 Amount for contingencies
Office expense $100 Minimal office expense
Payroll-employees $20,748 Computed as above
Payroll taxes $1,420 Is 10 percent of payroll
Professional fees $50 Using your basic bookkeeping
Rent $3,000 Building at $1,000 per month per bid
Repairs and maintenance $200 Expect minimal based on new equipment and leasing
Salary of owner $0 Owner has saved enough cash and wife works
Sales tax $0 Cash sales, sales tax is paid by customer
Supplies $100 Internet fees and various charges
Telephone $300 Business rate of $100 per month
Utilities $1,200 All utilities estimates for 90 days
Total $33,718 Working capital needed for the first 90 days

The total amount of working capital needed for this sub shop is $33,718. This is an estimate of the amount that this new business will need from the first day the business is open through day 90. Refer to cash needed to get to opening day to compute the amount of cash needed to start the business. See getting a loan for the steps necessary to obtain financing for your new business.

If you're interested in estimating your costs beyond the 90 days, see our discussion of managing your cash flow.

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