What are the costs of starting a company?
If you are convinced that you have the winning idea for a successful business, before launching your startup on the market you should take some time to think about the costs associated with it. Thinking about how much it costs to open a business must be a 360-degree process: in fact, in addition to the money you will need to set up the startup, you must also put into account the money needed to run it and carry it out in the best possible way.
Although much depends on the type of business, the sector you are in and the business model you adopt, it is fair for you to know from the outset that the expense items, generically speaking, are not few. You must, first of all, budget for the professionals who will help you fulfill any bureaucratic obligations, but you cannot neglect the investment needed for the premises and equipment your startup will need, as well as that for the advertising you will need to make yourself known to your future customers. And not only that.
The time has now come to understand in more detail, item by item, how much it costs to open a business in Italy today.
What are the initial costs?
Let’s start, of course, with the initial costs, i.e., those needed to start your startup the costs of setting up a company are mainly related to the fees to be paid to the notary and accountant and the taxes and stamps.
Accountant and notary public
Let us take as an example the cost of opening an SRL (Limited Liability Company), which is the corporate form chosen by most entrepreneurs (also because it ensures the separation of the assets of the company from those of the partners). Clearly, the costs vary from case to case, but in general it is possible to estimate them at around 1500/2000 euros for notary fees (including fees, taxes and stamps) and 1000 euros for the costs related to the accountant, who is responsible for drafting the Articles of Association and taking care of the attribution of the VAT number and Tax Code and other formal obligations.
In addition to the initial costs, the item “accountant” also includes expenses related to the maintenance of the company. In this regard, you should know that, according to the fee schedules of the various Boards of Accountants, the annual expense for tax and accounting management entrusted to the professional depends on certain parameters, such as the number of VAT transactions and accounting records, the number of Banks used, the presence of additional special accounting requirements that amplify the workload, as well as by any additional operations, such as the telematic payment of F24, the drafting and registration of contracts and communications with public and non-public bodies.
Again taking the case of an SRL as an example, the annual expense to be allocated to the accountant’s fee can start roughly from a base of about 3,000 euros.
Licenses, permits and insurance
Depending on your startup’s industry, you should know that you may have to expect to incur additional expense in obtaining licenses or permits or in taking out insurance or complying with required occupational safety regulations. For example, those in the food industry must obtain HACCP certification by attending specific courses, and prepare relevant manuals and procedures. The cost, in this case, can vary greatly, from a minimum of € 50.00 per single course reaching even over a thousand in case of manual preparation.
Purchase or lease of resources
You have to take into account, also, that to start a startup you have to have some resources that are essential and, in many cases, also expensive. Those who sell goods, for example, unless they decide to dropshipping, have to buy and stock raw and subsidiary materials. To avoid unnecessary expenses and waste, the advice for you is to limit yourself, especially in the delicate initial phase of startup launching, to buying minimal quantities. However, this quantity must, of course, be sufficient to meet the sales forecasts you formulated in the business plan. What makes the difference is choosing the right supplier.
The amount of inventory you need to purchase is also inevitably linked to the warehouse you may have. Purchasing (or renting) a warehouse is another important expense item for those who intend to start a new business dedicated to selling products. For this reason, as already pointed out, if you plan to operate in the ecommerce sphere, you should consider using dropshipping: this particular business model allows you to sell products without physically owning them, since, when a customer completes the purchase on your online store, you will simply forward the order to the supplier and pay him the wholesale price, and he will be in charge of storing, shipping and delivering the product to the customer.
Office and utility expenses
Some businesses allow you to work from home; others, however, require a separate physical location. Remember that the expense, in this case, does not end with the purchase or rental of the location: you must also put into account the need to carry out work on it, due, for example, to requirements related to the safety standards to be observed or the possibility of a possible expansion of the business over time.
Other work that needs to be done is that required to connect the premises to the water supply, power grid, and Internet. Pay close attention to what the market offers because many providers provide discounted rates for business users.
Whatever area you plan to operate your startup in, you will need specific equipment for your work. When assessing the costs of starting your business, it is advisable, therefore, that you make a list of absolutely essential resources so that you can exclude unnecessary purchases and check whether the overall investment is within your budget.
Purchasing the equipment, of course, costs far more than renting it, but it gives you total control over the tools at your disposal. Don’t forget, however, that it will also be up to you to maintain them in the long run. Renting equipment, on the other hand, gives you the opportunity to keep the financial outlay low and defer the payment. A word of advice: if you feel that the equipment may soon fall into disuse, the option of leasing or renting may be for you.
The technology and IT sector deserves a separate mention, as this is a particularly expensive item of expenditure. In this regard, remember that, in addition to the leasing option, you also have the option of buying remanufactured tools, which can ensure good performance at a lower cost.
Marketing and website
Once you have identified the right naming and brand identity, it is time to introduce the topic of marketing and website: the purchase of a domain name and web hosting service has a cost that varies depending on several factors but which, roughly, is around 10-20 euros per year for the former and 50-100 euros (also per year) for the latter (but this figure can reach 2-3 thousand euros for larger websites). The costs for the site, however, do not end at these two items: you must also take into account the possible expense to be allocated to those who will deal on a practical level with the creation of the website and its maintenance.
A website, then, must be properly advertised because, if your potential customers do not know you exist, they are unlikely to buy your products or services. Relying on a team of marketing plan experts is always a good rule of thumb, but of course this requires an investment that can further increase the expense of starting a new startup.
We have come to the last item of expense, only mentioned so far. You will not be surprised to learn that, in your thinking about how much it costs to open a business in Italy today, you must also factor in the taxes your startup will have to pay.
There are so-called fixed taxes and fees, i.e., not linked to the presence of a profit, such as, for example, the tax on company books, registration with the cciaa, revenue stamps for accounting records, membership fees for possible consortia, and so on.
Next we have taxes and fees directly proportional to the profit generated. Remember that the first year of profit, you have a double outlay, as the Italian tax system asks for balance and equal amount of down payment.
Clearly, this expense item depends on the type of company you want to set up, its scope of operations, and a number of other factors that can make the result vary even significantly. This is a very complex and sensitive issue, on which only an expert can help you gain clarity. Rely on an accountant you trust but, as in every other area mentioned so far, always try to have absolute control over the present and future economic sustainability of your business. Warren Buffett, not surprisingly, teaches:
“Investment must be rational; if you can’t understand it, don’t do it.”
In conclusion: how much does it cost to open a business today?
We have reviewed the main expense items that affect the cost of opening a new startup in Italy today. Obviously, this is only indicative information because it is impossible to provide an up-to-date and valid cost overview for every startup company. Stay focused on your specific case and pay special attention to the moment of developing your business plan, because that (and only that) can and should be the road map to follow on your journey to success. Also, do not overlook the importance of the funding plan: knowing how much it costs to open a business also helps you understand what funds your startup needs and can help you figure out how to find them.