WFor once in their life, everybody has thought about starting a business. However, for most, it remains an idle daydream for several reasons, like financing, feasibility, and profitability. But it’s not always a far-off goal. If you’re one of the few who’s ready to take that first step, start by understanding how much money you need to get your business off the ground.
Financial planning helps you avoid unwelcome surprises and ensures you can sustain your operations from day one. With varying costs, you’ll need to have a clear picture of how much capital you’ll need for different types and sizes of businesses. Let’s get into it.
Price Estimations for Business Requirements
Here’s a rough breakdown of what you’ll need to invest in to get your business off the ground.
1. Business registration fees and permits
The costs associated with business registration are the most consistent, no matter the type of business. Every new business has to go through registration with the appropriate government bodies. The main two are the following:
- The Department of Trade and Industry (DTI), if you’re the sole owner
- The Securities and Exchange Commission (SEC) if you’re starting a partnership or corporation
Certain types of businesses may have more requirements. For example, courier services that handle importing or freight forwarding will need a permit from the Philippines Economic Zone of Authority (PEZA).
DTI registration varies depending on the business scope, from barangay to national. The price range is ₱200 to ₱2,000, with an additional ₱30 for the Documentary Stamp Tax. On the other hand, the SEC registration will depend on your initial capital stock, but it will be no less than ₱3,590, including the miscellaneous fees. See the complete list of fees for more information.
All businesses also need to secure a Barangay Clearance and a Mayor’s Permit to operate legally in their chosen local area, with fees varying widely based on business size and location, typically ranging from ₱200 to ₱2,000.
2. Capital investment
Your capital will largely depend on the type of business you’re planning to launch. Don’t worry if you don’t quite have enough for your estimates; you can always rely on a financing company to make up the difference. Here are a few common types and their associated startup costs.
Small retail or food cart business
For a small retail shop or food cart business, you’ll need approximately a capital of ₱300,000 to get started. This amount accounts for basic inventory, a small retail space, and initial setup costs.
Service-based business (e.g., freelancing, consulting)
Service-based businesses, like freelancing, consulting, or online teaching, often have lower capital requirements. Your main costs will be for essential tools such as a laptop, software, and perhaps a home office setup. You could start with as little as ₱20,000 to ₱50,000.
Brick-and-mortar store or café
A more sizable physical location will entail higher costs because of its size—rent is higher, you need more equipment, and designing will require significant capital. A typical budget for this type of business ranges between ₱500,000 to ₱1 million. This figure includes upfront costs like rent, furniture, kitchen equipment, and renovations.
3. Operational expenses
After establishing your business, you’ll need a budget for ongoing operational expenses like operational costs and revenue. Monitoring your financial ratio is essential for maintaining profitability and growth:
Rent and utilities
Leasing a small commercial space in the Philippines will likely set you back ₱10,000 and ₱30,000 per month, depending on the location. Additionally, you’ll need to budget for water, electricity, and gas, which can range from ₱5,000 to ₱10,000 monthly.
Staff salaries
If you plan on hiring employees, the minimum wage in the Philippines depends on the region, but generally, it’s around ₱12,000 to ₱15,000 per month per employee. Keep in mind wages can be significantly higher if you require more specialized employees.
Marketing and advertising
A digital marketing campaign through online ads or social media typically costs between ₱5,000 to ₱20,000 monthly. This amount depends on the platform you use and the scale of your campaign. It’s also possible to save money by relying on organic traffic strategies.
4. Inventory and supplies
If you’re selling products, account for initial inventory and supplies. This upfront cost will heavily depend on your type of business. Here are two examples:
For a small retail shop or sari-sari store, you’ll likely need to invest between ₱20,000 and ₱50,000 for your initial stock. This value covers the variety of goods that you plan to sell.
Sourcing raw materials and supplies for a food business is a bit more costly, ranging from ₱30,000 to ₱150,000. You have to consider ingredients, packaging, and other consumables necessary for food preparation and service.
5. Equipment and tools
You might think you’ll only purchase your equipment and tools once, but you’ll also have to consider the cost of ongoing maintenance.
A food cart business needs cooking tools, food carts, and packaging materials, which can cost anywhere from ₱30,000 to ₱100,000. As for a service-based business, you need to include items like laptops, printers, and office furniture that can set you back between ₱20,000 and ₱50,000.
Total Startup Cost Estimate
After outlining each expense category, you can now estimate your total startup costs based on the type and size of your business. This rough estimate provides a solid starting point for planning.
For example, if you’re starting a small food cart business, expect to budget around ₱100,000 to ₱300,000 to cover registration, permits, equipment, inventory, and initial operational expenses. On the other hand, freelancing or consulting businesses may have lower startup costs, typically ranging from ₱20,000 to ₱100,000.
Track every expense category so you have a clear picture of where your money will go. This practice helps avoid unexpected expenses and sets you up with a concrete and practical idea of how much you need.
One Step Closer to Your Dream Business
Starting a business may have once seemed like a distant dream, but with a clear understanding of the costs you’ll face, you’re now better prepared to take that leap. Knowing where your money will go helps in building a sustainable venture—and financial planning is your first concrete step toward success.If you’re ready to chase the business of your dreams, Asialink Finance provides comprehensive loan solutions for putting up a business in the Philippines. Apply for a collateral loan today and get the funding you need to make your dream business come to life!