Having worked through the previous two chapters, you should now have a clear idea of where you will be working from and the costs involved in working from that location, the minimum amount of equipment you can effectively work with during your initial set-up phase and first year, and will be thinking about whether you want to be working full-time or part-time in your chosen therapy. Now comes the reality check – costing it all out.

Planning For Financial Success

You may have planned various aspects of your life before, for example, a long holiday or a new kitchen, or you may be a relative newcomer to planning. However, one thing is certain, a lack of planning at this stage may result in financial problems which could easily have been avoided. Do you know how much it is going to cost you to start up your new business? And, do you know how much you will need to be earning from your business in that crucial first year in order that you can meet all your outgoings?

Until you have worked out exactly how much money you will need in your first year of business, you won’t know how much you might need to borrow, and if you can’t produce a solid plan outlining all the relevant details your bank is unlikely to make you any loans that you might require.

Planning your business can be a lot easier than you think. There are six simple steps you need to carry out.

The Six-Step Planning Process

Step 1 – How Much Do You Really Need For Living Purposes?

A quick way of working this out is to look back over your last three bank or building society statements (include your last three credit card statements as well, if relevant). Now, calculate how much you pay annually for all your personal and household expenses. This will include rent, mortgage and utility bills as well as personal insurances and clothing. For some items, such as ‘entertaining’, you may need to provide a ‘guesstimate’ and decide what your future annual budget will be. Once you have these figures you can enter them in the following table (Figure 9):

Step 2 – How Much Do Your Business Premises Cost?

Step 2 – How much do your business premises cost?

If you’re not going to be working from home, then now is the time to start investigating the cost of renting premises and/or the cost of sharing rooms. Try to get at least three sets of costs that you can compare, and then take the average of the three as your guideline. To these costs you may need to add business rates, water rates, gas and electricity charges, telephone and internet costs and cleaning. You may be able to get some of these figures from your potential landlord, others you will need to guess at. As a general rule, round the costs up rather than down, as most people underestimate their outgoing costs.

Don’t forget to add any insurance costs. Although your landlord may not make any charges for insurance related to any common parts, you will still need to be insured for any claims made by your clients or visitors. This public liability insurance will generally be included within your professional indemnity insurance (see step 4 below). If it isn’t you will need to arrange for this separately. You will, of course, also require your own office contents insurance, to guard against the risk of loss in respect of any break-ins or damage.

Once you’ve worked out these figures, enter them in the table below (Figure 10).

Figure 10.

Business premises costs.

Step 3 – What Are Your Equipment Costs?

If you’ve worked through the checklist in Chapter 2 you should already have a clear idea of what equipment you will need for your first year. Now it’s time to add in the figures if you haven’t already done so. Ring round suppliers to get quotes for equipment and/or copies of office, medical and specialist suppliers catalogues, and use these for your equipment costings.

Remember to take a strategic view of all your needs, so you may want to complete two lists: one for the essential equipment you will require to start the business, the second for equipment for which you can wait a bit longer before purchasing, for example, items which might help the business run more smoothly or efficiently such as extra chairs for visitors or the waiting room.

As well as the essential equipment, don’t forget to cost your initial business stationery needs such as pens, paper, printer ink, diary, business cards etc. Some office suppliers offer a starter pack which may be helpful, but check that you will be using all the products before you decide to purchase. If you are going to get your letterheads, compliment slips and business cards professionally printed, rather than printing your own, you will need to ring round for some quotes.

Don’t forget that the equipment you purchase when you set up will eventually require replacing. If you can afford it at this stage it’s a good idea to plan for it by building an aspect of this into your budget now. Add an extra 20% to the figures, as most equipment and furniture should last for between three to five years before it needs replacing. Use Figure 11 below to work out your costs.

Figure 11.

Equipment costs.