Why You Should Never Underestimate Your Start-up Costs

Savvy new restaurateurs that are prepared and have sufficient start-up capital are more successful bringing their ideas to fruition. Discover why accurately estimating and funding your start-up costs will position you for success.

Avoid Delays

From writing a business plan to choosing a location, staffing, integrating POS systems, online ordering, and more, opening a restaurant can take months of preparation, according to Grubhub.

Things like construction and renovations, and red tape associated with permits approvals, etc. can slow down even the best laid plans. These types of snags are not out-of-the-ordinary and can be expected.

However, any financial hold ups can be avoided by planning expenses wisely and having sufficient start-up capital.

This allows restaurateurs to seize on opportunities to make great deals, book sought-after contractors, meet permit and inspection deadlines, and more.

Have A Safety Net

It may take some time to become completely profitable. That’s why it’s important to have a cushion of working capital available to cover operational expenses for at least 6 months to one year.

Otherwise, underestimated start-up expenses may have to be subsidized with other funds. These funds should normally be saved to help pay bills and operational expenses during the first year of operation.

By properly estimating start-up expenses, there’s no need to dip into reserve capital to complete the start-up phase. It’s best to allot enough start-up money and hold reserve capital to use later (if need be) to keep the business afloat.

This relieves pressure, allowing new restaurant owners to concentrate on building all aspects of their business—from dining room, to  take-out, delivery, catering and more.

Prepare For Emergencies

It’s important to expect the unexpected. Putting yourself in a position to respond financially to unforeseen emergency situations may not only save your restaurant, but your sanity as well.

Contingency money allocated in start-up expenses is the best way to prepare for unanticipated challenges. Being able to rebound quickly from a setback will help you keep up momentum and stay on schedule.

Some experts suggest that when planning for capital, use the “everything will take twice as long and cost twice as much as you expect” rule. While it’s impossible to budget exactly for an unknown snafu, setting aside 10-15% of the total investment is a good measure to prepare for emergencies.

 

With proper planning, estimating, and funding, your restaurant can gain these distinct advantages of sufficient start-up capital.

 

Check out Grubhub’s (Aspiring) Restauranteur’s Guide To Opening A Franchise.

Image: Pexels