12 Small Business Startup Costs in Tanzania You Should Expect

Starting a new business can be exhilarating. Still, for first-time entrepreneurs, that thrill often coincides with fear that their venture will fail. For instance, you might worry about financial burdens, like if you’ll be profitable in the long term, or how much you’ll spend on starting the business. If you’re unfamiliar with start-up costs, they are the expenses you’ll incur prior to your business generating income.

Business startup costs can add up quickly. You’ll likely need to invest in equipment, raw materials, payroll, software, and office space, just to name a few expenses. Plus, you’ll also have to pay for permits, marketing costs, and any needed legal fees.

Unfortunately, it’s common for new business owners to haphazardly jump into planning without considering if they can afford necessary small business startup costs. This often leads to the business being unable to sustain itself.

If you aren’t meticulous about financing planning at the beginning, you could risk your business’s future. In this post, we’ll examine how to estimate startup costs so that your business can become a success!

The Top Business Startup Costs You Should Be Aware Of:

1. Research Expenses

Prior to starting a business, you could conduct market research about your prospective industry. Some startups neglect this step, which causes them to be unprepared or unable to execute their ideas. To avoid this, consider hiring a market research firm to assist you in the assessment process. Of course, following this route will mean that you’ll have to pay these experts, so include this in your budget.

2. Equipment

Most new businesses will have an immediate need for equipment. For example, if you start a Logistics company, you’ll need to purchase a truck. Or, if you open a restaurant, you’ll need stoves and other kitchen equipment. Depending on your industry, the equipment can be costly, especially if you have multiple employees who need their own equipment.

Luckily, there are numerous types of equipment financing available, ranging from loans to leases to lines of credit. If you’re concerned that you won’t be able to afford necessary equipment, you might benefit from applying for equipment financing to get started. Regardless, if your business requires equipment, this should be an area that you make sure that you budget for.

3. Fees

When starting a business, you’ll need to choose a business entity, which will determine the way your taxes are structured. For instance, if you incorporate your company, it’ll be a separate legal entity, and you’ll need to file articles of incorporation with your BRELA. This comes at a cost.

We suggest reviewing the Business Registration and Licensing Agency breakdown to determine how much it’ll cost to incorporate a business. Even if you skip this step for now, you’ll likely need to register and apply for operational licensing and/or permits. The specifics of this will depend on the type of business you’re operating.

Some businesses, like those in the agriculture or aviation industries, require BRELA licensing, while service-based industries like hairdressers and small retail shops needs Municipal council licensing.

If you’re unsure of how your business’s industry is categorized, check out the Government’s guide on licensing and permits.

4. Office Space

Regardless of whether you rent or purchase a business location, it’ll be fairly expensive. Due to this, many small business owners operate from their homes in the beginning. If you’re low on cash, this might be your best option to start.

If you get locked into a long-term lease, you could be paying a considerable amount of money. Plus, you’ll have to factor in utilities and other operational costs. Even if you can afford it, a typical lease can take months to get set up, and you’ll need to negotiate a lease, design a layout, buy furniture, and set up equipment prior to opening your doors.

It’s also important to note that you may need to start paying for rent prior to starting your business. Thus, if you put down a security deposit and pay rent prior to opening your business, that is considered a startup expense.

If you truly can’t afford any sort of space, you could work on a traveling basis. For instance, a service business could visit clients in their homes, instead of having a business location. No matter what you decide, you’ll likely have to factor in space to your startup costs.

5. Inventory

Although all businesses don’t sell inventory, if you’re in the retail, restaurant, wholesale, or manufacturing sectors, you likely need some form of inventory. Unfortunately, ordering inventory can create financial challenges. If you have too much inventory, you risk spoilage or getting stuck with items that aren’t selling. But if you have too little inventory, you could lose customers who aren’t willing to wait for an item to be restocked.

Although inventory financing exists, it comes with minimum requirements which usually aren’t possible for new startup businesses to meet. We suggest making inventory a part of your initial startup budget, then apply for financing once your business is operational if necessary.

6. Advertising

When you start your business, you’ll need to spread the word about your products or services. For instance, you might invest in banners, business cards, online PPC advertising, print ads, and brochures, to name a few ideas.

Without investing in marketing, you won’t be able to accrue sales. Still, to keep costs low, we suggest utilizing social media sites like Facebook and Twitter to advertise your new business. This way, you can market your business for free until your business starts generating sales!


7. Website

We live in a technology-driven world, and your startup’s online presence is often the first interaction someone will have with your brand. Due to this, it’s important that your business has a professional-looking website that’s user-friendly and provides customers with information about your services, products, hours, and contact information.

Most customers research products or services on the Internet. Even so, 59 percent of businesses with fewer than five employees don’t have an online presence. It’s very easy to ensure that you’re in the other 41 percent, thanks to services like Squarespace and WordPress.

To get started, register for a domain name, which usually carries a yearly fee. Then, pick a content management system (CMS) that you can build your website through. Sometimes CMS services are free, but often require a monthly or yearly subscription cost.

If you’re fairly tech-savvy, it’s pretty simple to do this even without a coding background, but if you’re not familiar with web design you may want to hire a web design company to build the website. Of course, this will be an additional cost, but usually it’s worth the investment.

We Can Create a professional website for you Business Contact us

8. Office Supplies

Surprisingly, office supplies can add up rather quickly. If you’re operating in a traditional 9-5 work environment, then every employee will need a desk, chair, computer, and phone. Add in a water cooler, fridge, microwave, coffee, filing cabinets, and software, and you will reach a hefty sum.

In terms of computers and office equipment, you may think that these should be considered assets. Currently, you may deduct around Tsh. 3 million  in this category. Don’t overlook office supplies, they can become a large chunk of your startup’s budget!

9. Utilities

This type of cost applies to traditional commercial office and brick and mortar space leasing arrangements, you’ll be responsible for paying the electric, gas, water, Internet and phone bills. When determining your business’s budget, this should be factored in not only as a startup cost, but also as ongoing business expenses that you’ll always need to afford.

10. Payroll

If you’ve hired employees for your business, you’ll need to pay them even if your business isn’t generating money yet. In addition, you should be allotting a certain amount to pay yourself. Remember that payroll includes benefits as well as all bonuses, stipends, commissions, and overtime pay.

Many small business employers choose to outsource some of their payroll and related tax duties to third-party payroll service providers. They can help assure filing deadlines and deposit requirements are met and streamline business operations.

11. Professional Consultants

It may be tempting to try to be a jack of all trades – taking on as many responsibilities as possible to save money. You may think you can survive without hiring professionals such as bookkeepers, CPAs, or attorneys, but this isn’t always wise.

For examples, accountants can explain all the different legal structures such as S-corps, C-corps, LLCs, and sole proprietorships. Then, they can help you determine which one is best for you. They may also help you determine which benefit program to implement for your employees and ensure that you’re complying with state and federal regulations.

Then, when tax season rolls around, they can save you huge sums of money in deductions on your tax return. This is just one example of how outsourcing certain tasks can be beneficial to your business in the long run, even if it adds to your startup costs!

12. Insurance

Just like you protect your health, car, and house, your business needs protection too. There are several different kinds of business insurance, and depending on your business’s industry and other preferences, this could save you money and stress in the future.

Next Steps:

1. Understand Recurring vs. One Time Costs

You must understand that many of these costs are going to be recurring, so you’ll need to keep them on a monthly or annual basis. Other ones, such as incorporating fees or office furniture, are considered one-time costs. When you’re calculating your startup expenses, a good rule of thumb is to be able to cover six months of expenses up front.

In other words, don’t count on your business’s revenue to start paying for your costs until after that early period is over. You’ll need a cushion while you’re developing your business and attracting new clients.

2. Hunt for Bargains

Smart consumers do extensive research before they make any purchases and recognize that there are ways to reduce some startup business costs.

Using software like Xero instead of hiring a full-time bookkeeper, working from home or a coworking space instead of signing a commercial office lease, and doing most of your marketing through social media and content marketing will all help to make your budget a little more manageable in the beginning.

Still, there are some costs we don’t recommended that you try to cut corners on. For instance, don’t buy used or poor-quality equipment just because it’s cheaper: you’ll lose time and money in the long run when you make repairs and eventually must buy new equipment.

3. Pursue Startup Financing

Very few small business owners can fund their business startup costs all on their own.

According to research, about 75 percent of small business startup financing comes from loans, lines of credit, and credit cards. In addition, consider trying to fund startup costs yourself, and applying for a small business loan once your business is up-and-running. This way, you’ll be more likely to qualify!

Conclusion: Invest in Your Business from the Start

Before you start a business, you should carefully consider your idea or product, how much you should charge, and understand the challenges you could face. Then, once you establish your company, you’ll need to consider how much money you should have to start, how to structure your business, and create a business plan to keep you organized.

Financing is one of the most stressful parts of entrepreneurship but being realistic about how much money you need and accurately estimating your business startup costs will go a long way. Startup costs are conceptually simple: add up expenses you’ll incur before starting, assets you’ll need, and how much money you’ll require to be operational during the first few months before sales start rolling in. Let us know in the comments if you have any questions!

Disclaimer: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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