Written by Bubacari Marega

8 July 2022

10 Min read

Content

1. Startup Expenses
2. Startup Assets
3. Recurring Startup Costs
4. How will you finance your business?

"If you Fail to Plan, You Are Planning to Fail" - Benjamin Franklin

The importance of having a Startup business plan is to answer the fundamental, and vital questions of how much does it cost to start a business in Gambia or in Africa for that matter. Simple estimates of startup cost can help founders to know the capital needs of their business to increase their chances of success. 

This estimates do not need to be exact or complex, but based on physical market research about your market obtained on the ground because readily available information is scarce in Gambia. This estimates can be done with Excel Templates.

How Much does it cost to start a Business in Gambia Africa?

It depends. There is no universal method of estimating startup costs as every business is different, and has its own unique capital needs at the start. Some business ideas can start on a smaller capital of D4,500 (e.g. Street vending) while others may require a considerable amount of cash as much as D200 million for commercial banks in the Gambia. Its recommended to start small as you gain better understanding of the mechanics of doing business in Gambia. Start up cost should be simple to prepare but requires some market research to get it right. 

The total cost to start your business is the sum of the expenses that will be incurred before business operations start, assets the business need at beginning, and the working capital you will need to keep the business running during the first few months before customers buy and pay. 

Startup cost can be divided into three main groups: 

1. Startup Expenses

2. Startup Assets

3. Recurring Startup Costs

1. Startup Expenses

Startup expenses are one-off expenses that will occur before the business start selling products or services. These pre-operating generally include:

• Legal and regulatory cost: The monies you will pay to lawyers for establishing the business’s legal structure, as well as registrations fees, trade licenses that needs to be paid to the local government.
• Insurance: This include any insurance premium you will incur before the launching date. For example, insurance of the stocks, vehicles, property etc.
• Staff cost: If you plan have few employees with you before the operational start or paying yourself a salary, you need to consider those cost in the startup expenses.
• Rent advances: Unless you are planning to do home-based business; most landlords will require you to pay rent at least one to six months or even a year in advance. Any rent that should be paid prior to operational start should be considered as startup expenses.
• Training: Important training that are required to start the business. It could be the training of employees or the business owner. It should be part of your startup costs if it will take place before the official start.
• Pre-opening marketing: Advertising and marketing expenses that will happen before operations start — It can be the radio or print adverts, brochures, online promotions or press releases.
• Office supplies and stationery: Chances are you will need some supplies in your new business. Paper, pens, business cards and even your paper clips. These supplies should be listed as startup costs.
• Consultants: Whether they consulted on business plan, marketing research, or technology, the costs associated with their services should be considered as part of your startup expenses.
• Other costs: Any other expenses associated with your startup should be included. For example, electricity deposits, phone services etc.

2. Startup Assets

Assets are tangible things like table, chairs, land, equipment, and sometimes intangible things like intellectual property, trademarks, logos, slogans you own. For example, "Sunu Buss" is a slogan property of Qcell Gambia. Unlike expenses, assets are not charge to income statement. However, assets whose value declines over time can be depreciated. When the business started, assets will form part of your balance sheet. Common startup assets includes :

• Cash in the bank: In addition to the cash you will use to cover your few month expenses (before customer start buying), you might want some extra cash in your bank account to cover unforeseen expenses.
• Starting stocks or Raw materials: If you will manufacture or sell products, you should include the money to be spend on the stocks needed to start operations. If you are starting a service-based business you might need a PC, printer, paper etc. 
• Office furniture and fixtures: If you must buy some furniture before starting, you should include the cost here. Chairs, tables, filing cabinet, signboards, appliances, all fall into this category of startup costs.
• Leasehold improvements: This includes the major renovation costs for the office or store before the business start.
• Plant and equipment: This cost will depend on the type of business you are starting. If your business need to buy plants and machinery, then consider the cost here but a service or small business may not need it.

3. Recurring Startup Costs

One of the hardest part of startup cost calculation is the estimation of cash you’ll need to have in the bank as a working capital, to keep the business operating during the infancy months. Infancy month meaning the period just after the start of operation to period when sales grow enough to support the normal cash expenditures of the business.

There are several theories on how to do this. Some people advice cash reserve that will cover up to six months operational expenses whiles others say a year is better. However, starting small will require lower cash reserve to get you going. 

The differences between startup expenses and recurring startup expenses is that startup expenses are the expenses you would incur before starting business whiles recurring will be those expenses after starting business but before making enough sales to cover expenses. Its important to budget for recurring expenses to avoid early burnout, cash flow issues and financial distress.

For every item on this list, make an estimates of the amount and if you can’t estimate the price then do some research. For example, visit a furniture shop to find out about chair and table prices or an accountant to know the current business accounting cost.

How will you finance the business?

The next step is to figure out the best source of finance for your startup. Here are some options to consider:

• Shared investment: This could be your personal savings and/or fund raised from other investors. Avoid Relatives and friends investments as its never a good idea to mix relationships with business.
• Borrowed money: Includes bank loans, credit card debt, loans from friends and family members. Be prepare to repay the principal with interest. Also, get the loan agreement in writing, even if you are borrowing from friends and family to avoid misunderstanding.
• Grant: You could also seek for help from government and non-governmental organizations through grants.

In conclusion, startup costs are the sum of what you will spend as startup expenses, plus what you need to spend to buy startup assets, plus the cash you need to have in the bank the day you open your business. Planning for these critical expenses will reduce unpleasant surprises.

BMA Bookkeeping and Accounting can help you in the preparation of your business plan in the Gambia capitalising on our own experience of starting a business in the Gambia and our Know-how about the gambian business landscape.