Entrepreneurs with the best ideas can fall at the first hurdle through lack of capital to keep their business afloat before it begins to generate cash and becomes profitable. Lack of working capital is one of the most common reasons small businesses fail within the first twelve months. In order to ensure your business gets off to the best possible start you should sit down and work out how much money you're going to need to get your business off the ground.

The key to working out start-up costs for any business is realistic planning, organisation and budgeting. You can begin by separating your likely costs into two lists - one-off costs such as renovations, fees and legal costs; and regular payments such as rent, insurance and production costs. You will also need to consider how much additional capital you'll need to cover costs before the business breaks even and begins to turn a profit. As a general rule this is a minimum of three months but it depends on the market you are operating in. Some businesses take much longer to become profitable. 

Below are some basic categories you may find helpful when drawing up your own lists:

Location - the location and condition of your business premises will influence the amount of rent you pay and maintenance costs. You may also need to renovate or completely refurbish the premises to suit your business operations.

Administrative and operational costs - obtain quotes for the cost of insurance to protect against fires, floods and other damage to your property, as well as unforseen interruptions to your business. Don't forget to include utility, phone and internet, and other related operational costs such as cleaning and property maintenance.

Inventory - what are the production costs, raw materials, and the wholesale price of goods you intend to sell? You should also work out packaging and shipping costs, and any other expenses related to the sale of your products or services.

Equipment - consider any machinery or technology you need such as computers, telephones, copiers, point-of-sale equipment and other items.

Employees - this will include salaries, wages and benefits, not forgetting overtime, bonuses, workers' compensation and payroll taxes.

Marketing - marketing costs will consist of ad campaigns, stationery, marketing materials and other related items such as signage and money spent on wining, dining and entertaining potential clients.

Professional fees and permits - work out how much you are likely to spend on legal, accounting and other consultancy fees. If you are short of capital and will need to borrow from a financial institution, bear in mind most banks and other lenders will require a detailed business plan, projected cash flow statement and a three-year projected income statement. Unless you are experienced in business finance you will probably need to pay for professional advice to compile this information.

Personal living expenses - you also need to factor in your own personal living costs for at least three to six months if the business is going to be your sole source of income. When working out start-up costs this basic but crucial point is sometimes missed and can lead to budding entrepreneurs coming unstuck early on.

This is a brief and by no means comprehensive selection of things to consider when developing a start-up budget. Even entrepreneurs with a great idea and access to plenty of cash can fail if they do not have a clear plan of where they want to go or underestimate the cost of bringing their vision to life. Ask other people with similar businesses what their costs are and what expenses they forgot to 'factor in' before starting up. You can also get advice from professionals that specialise in dealing with small businesses. Always be cautious when working out future costs. Overestimating future expenses and underestimating sales will only leave you with more capital to use somewhere else in your business. Doing the reverse could lead to your business going under before you really begin.