An important mark of your ability to succeed in a financial advisor business is your ability to project costs. This begins with your projections of the costs of launching the business which, in turn, determine the funding you will require in order to reach break-even. The startup costs should be detailed in your business plan and these are the major categories of costs to consider.
To launch a legal business, there are a number of insurance and licensing requirements. You will need to pay for official incorporation of the business, a business license to operate in your field, and permits for any construction or renovation you must do to your location. Insurance premiums should include renter’s insurance for the assets in your location, liability insurance for the effects of your business on others, and worker’s compensation insurance for employees. Discuss all of the costs that should go into this category with a lawyer familiar with experience in financial business startups in your county to be safe.
Assuming you will operate your business out of an office space, some money must be spent on preparing that space. This will include renovation (contractor’s fees, plumbing, electrical, etc.) as well as the required furniture and equipment (desks, chairs, computers, plants, etc.) The extent of these costs will depend on a number of factors – whether you will have employees and how many, whether you will meet with clients in your office, and whether you are operating a walk-in business that requires waiting space or an appointment-only operation.
Your initial funding must cover all of the marketing expenditures for your business before opening to build awareness among your potential client base. This includes all marketing work which requires cash, such as advertising, direct mail, hiring a PR agent, creating business cards or flyers or building a website.
After all of the expenses you have before you launch and revenues begin to come in, you still must have cash reserves to keep a positive bank balance until your cash inflows from sales are higher than your cash outflows for operating expenses. By creating a monthly or even weekly cash flow projection for the business, you can determine the size of cash reserves that you need. Make sure your projections are conservative and still show a healthy bank balance throughout, to keep your business open in case revenues are not as high as you expect, or unexpected expenses arise.