Before starting a business of any nature, you need to answer the fundamental and critical question of how much capital your business needs. Having an educated idea about start-up costs will benefit your future business more than rushing in blindly and facing unforeseen problems. They key is to simply look at your business expenses as different components.

You can start calculating the potential business cost by making three simple lists, good market research for educated guesses and adding them up. If you’re keen on borrowing, then consider business loan calculator to know how much you can borrow as well the interest cost for a specific time period. Business tools like Kikka's business loan calculator estimates the amount you can borrow from lenders and plan ways to pay off your loan faster.

List all spending on assets. The assets of your business are the things that you will use in your everyday business operations. For example, if you are starting a physical store, it might include items such as computers, printers, tables, some furniture and so on. Your staff might need special equipment as well.

If you are creating or selling products, you need to know the entire inventory that you’ll need when you start. One quick example is a coffee shop preparing all the ingredients for coffee making or a bookstore stocking its shelves before opening. If you are starting a service business, then you might not need inventory. You may skip this step. All of these make up your starting assets.

Now for all the items on this list, make an educated guess of what the amount of expense will be. An educated guess is obviously based on market research. Online resources are available as your reference. Although office equipment like computers should generally be included on this list, it is not mandatory. Adjust to the things your business truly needs.

List spending on expenses. Naturally, not everything you will purchase is an asset. You also spend money on expenses. For instance, it costs money to just set up a partnership, a legal corporation or an LLC. The money you’ll use to have a website built for your business, the costs of renovating an old space and the salaries you pay your staff are expenses as well.

Now, simply add up your starting assets as well as your starting expenses to calculate most of your starting costs.

Assess how much money you’ll need to start. Lastly, know how much capital you will need to have as savings for the early months while you are ramping up your start-up and not generating enough sales to cover all costs and expenses. You may need to cover for six months or longer, but it’s not always that easy.

If borrowing is part of your plan, but you have a bad credit score, then consider online business tools like Kikka’s business loan calculator to know how much you can borrow as well the interest cost for a particular time period.

To start, estimate the first 12 months of sales, costs of those sales as well as extra expenses. What you need to end up with is a list of 12 months complete with estimated sales, expenses and costs for each month. Now subtract the costs and expenses from the sales for every month.

The result should show whether you are savings are enough or if you’re still short. You’ll know from the date how many months it will take to start breaking even as well as the amount of money you’re missing. That’s what you will need to have as starting cash. Now you’re on your way to making a good business plan.