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Remember, too, that these expenses are only the ones you can anticipate. Starting a new business usually takes more money than you expect. Allow yourself a buffer for unforeseen expenses.

Break-Even Point

Another crucial step in planning for the financial health of a new business is calculating your break-even point. Your break-even point is how much income you need monthly to pay all of your bills including payroll.

Monthly Break-Even

To calculate your break-even point, begin by adding all your obligatory expenses.

Some expenses, such as FICA and SE taxes, are annual expenses. Others, such as insurance premiums, may need to be paid semiannually or quarterly. If an expense comes due annually, divide that annual expense by twelve to calculate monthly break-even. If an expense comes due quarterly, divide by three. In other words, calculate expenses on a per-month basis.

Some people like to add their own monthly salary into this equation. Others figure it separately. If, just to stay afloat, you must get some money out of the business for yourself, add a minimum salary into your calculations. If, at least at first, you have other sources of income to meet your personal needs, calculate your salary separately.