Which business startup costs should you prepare? – A complete guide
February 15, 2023
Starting up is a long journey. It is not simply about creating a product to offer to the market and then waiting for profit. It is a journey from bringing a product to customers, operating the business, continuously innovating new products, and improving customer service. Therefore, a business, that stops to wait for profit, is stopping its development. For startups who are climbing, stopping means falling, and getting up will be hard. For this reason, startups need to understand the basic business startup costs to prepare capital for their journey.
The business startup cost for Market research
To start a business in any field, the first business startup cost we need to think about is the cost to spend on market research, market analysis, and demand–supply evaluation to determine the desirability, feasibility, and viability of the opportunity. This expense may be incurred from accessing market and industry reports to do secondary research or studying/observing target customers directly, or both.
Expenses for market and industry reports
How much this cost is will depend on the knowledge and understanding of the founding team. If the founding team has a deep understanding of the market, and customers’ problems, this cost will only be a small amount. But the cost will be bigger if the founding team’s understanding is limited. For instance, they will need to spend from $100 to several thousand dollars to access industry and product reports. The deeper the report is, the higher the cost will be. For example, the fee to access the Statista Project account is $1,950 for one month.
Expenses for target customer survey
If the founding team has a wide network of friends as their target customer group, they can ask their own friends for help, thus the cost will be small. Otherwise, the cost will depend on the number of target customers, and the depth and length of the research. For example, according to Smart survey, the average cost for one survey response is £2 and up to £10 for a complex survey. SurveyMonkey also quotes the average cost to buy one response at $1. Expenses for focus groups will be much higher. For example, in Vietnam, you can pay from VND50,000 to VND500,000 for one customer. But in developed countries, the cost for each customer might range from $50 to $100.
The business startup cost for product development
Following market research expenses is the cost of product development. A product that becomes successful right from the first version is a rare case. Even in Food and Fashion (two industries considered easy to start up), the risks for the first product also exist. The cost of product development will fluctuate, depending on the technical requirements, and the complexity of the product. According to Crunchbase’s analysis of 123 successful startups, the cost spent on product development ranges from 10% to 40% of revenue, depending on the industries and business fields. For example, the product development cost for SaaS is 20%, for Social Media is 32%, Marketplace is 10%, Content distributor is 18%, E-Commerce is 15%, and Hardware is 13%. However, this is the ratio in companies that have operated for several years and had revenue. What about new startups? New startups normally have no revenue and limited capital. Therefore, they will create a prototype or MVP (minimum viable product) instead of a completed product to test the market. If the product is a physical one, you can use available materials to produce the prototype with limited expenses. However, for digital products, it is estimated that the cost of MVP development ranges from $1,000 to $100,000. The actual cost will depend on the complexity of the product and the country where you source your talent or providers since it will be subject to the wage and salary in each country.
Legal costs for new business establishment
To launch a product to the market, it is better if you are an organization with a legal entity. This means you will have to register your business and obtain any compulsory and necessary licenses to operate your business.
Business registration costs
Specifically, for startups in Vietnam, the cost for new business establishment in 2023 will range from VND5mil to VND7mil, including:
1. New business registration fee: VND100,000 or free of charge if you register online.
2. Fee for publishing your business registration: VND100,000
3. Business License tax: VND2mil or VND3mil per year, depending on your charter capital.
4. Seal-making cost: VND200,000 – VND300,000 for one Enterprise Seal, and VND70,000 – VND150,000 for one position seal.
5. Company Signboard making cost: VND 300,000 – VND1,500,000, depending on material and size.
6. E-Signature Token fee: VND1mil – VND2mil per year
7. Business Bank Account: opening for free of charge but maintaining the minimum balance of VND1mil is required.
8. E-Invoice: VND500,000 – VND1,000,000 for 500 invoices.
Trademark registration
Besides, if you want to protect your trademark, you need to pay for trademark registration. According to the National Office of Intellectual Property of Vietnam (IP Vietnam), businesses will have to pay the following fees:
No.
Trademark registration fee items
Fee (VND)
1
Filing fee (for every group of 6 products/services)
150,000
If you apply for more than 6 products/services, you will have to pay for every product/service from the 7th.
30,000
2
Fee for priority right (if requested)
600,000
3
Assessment Fee (For each group of 6 products/services)
550,000
If you apply for more than 6 products/services, you will have to pay for every product/service from the 7th.
120,000
4
Researching fee (for one group of products/services)
180,000
If you apply for more than 6 products/services, you will have to pay for every product/service from the 7th.
30,000
5
Application publishing fee
120,000
6
The filing fee for Trademark Registration Certificate
120.000
7
Fee for granting Trademark Registration Certificate
120.000
8
Fee for publishing Trademark Registration Certificate
120.000
Note: this is the cost of trademark registration in Vietnam. If you want to protect your trademark globally, the cost will be much higher, up to several hundred or thousand dollars, depending on the number of and the specific countries you want your trademark to be protected. In case your business uses a third-party service to provide you with the complete service package for business registration or trademark registration, you will bear an additional cost to pay for this third-party service provider.
Employee compensation cost
You can start with a small project like what Github did. Accordingly, the founding team developed the product themselves, received no payment, and hired no employees. However, when operating the business, hiring employees is a must.Employee salary is a variable cost, subjecting to the company’s location, business size, and workload. In Vietnam, the minimum wage in big cities is VND22,500/hour or VND5mil/month for trained employees. However, the actual salary paid will depend on the employee’s competence, expertise, and experience. There are employees who received several thousand dollars per month. Thus you need to prepare for it if you want to hire top talent with rare skills. Besides, you have to pay for other benefits, rewards, bonuses, etc., depending on your company’s policy.
The salary cost also varies among countries, especially between developed and developing countries. For example, the minimum wage in Australia is AU$ 21.38/hour, in the UK is £10.42 and in the USA is US$15. Meanwhile, the minimum wage in India is US$7/day and in Thailand is US$9/day. The differences in the minimum wage and living standards will have a big impact on the company’s salary cost, depending on where the companies source their talent.
No cost for office and equipment, is it possible?
For small businesses with little budget and digital companies, starting up at home is the best solution to save office expenses. Besides, companies can rent co-working space to save costs. Furthermore, they can have the flexibility to increase their space according to the size of the company while enjoying modern offices with all available facilities and equipment. The cost of renting a co-working space will depend on the number of seats you need, the private or public space. The rent is from VND800,000/month if you need a working desk. If you need a private office (10 to 30 m2), the rent starts from VND4mil per month. The cost for a meeting room is around VND200,000/hour.However, for products that need a large factory and a lot of machines and equipment, spending is unavoidable. The actual cost will depend on the number and type of equipment and facilities as well as the factory size that you need for your operation.
The business startup cost for sales and marketing
For new and small businesses, it would be difficult for customers to go to you directly. Because your brand awareness is not enough for them to remember. Therefore, preparing expenses for a well-prepared sales and marketing plan is necessary. The expenses spent on marketing and sales fluctuate according to the strategies and methods of each company. However, as a rule of thumb, small businesses should spend 5% to 20% of their revenue on marketing and less than $5,000 for initial branding activities.
Digital marketing expenses
For digital marketing, in Vietnam, the cost starts from VND5mil/month to build content, create and manage fan pages, design banners, posters for advertisement, etc. And you will need at least 3 months to see the result. For businesses with good strategies and plans, the time can be shorter and vice versa. Besides, if you plan to run ads, there will be an extra cost. For example, CPC and CPM for Facebook ads are $0.3 to $1, and $10 to $12 respectively. The similar costs for Linkedin ads are $2 to $5.58 and $25 to $34, and for Google Ads are $2 to $4 and $30 to $38.
The cost of OOH (Out of home) Advertisement, Influencer, and Event Marketing
The cost for OOH advertisement, influencer marketing, or event marketing will depend on the location to set the ads, the invited influencer to become your brand ambassador or the size of your event. For example, the cost of billboard advertisements in big cities like Hanoi and Ho Chi Minh City ranges from several hundred to several thousand dollars per month. The cost for an outdoor led screen is $8,000 to $22,000 per month. The expense to hire KOLs, and KOCs also ranges from VND10mil to VND100 mil per ad. The cost can reach up to million dollars if you hire top global celebrities. So, the expenses for these types of marketing are often very high, thus you need to consider them carefully for your Go-to-market strategies and plan.
Sales expenses
If your company uses sales staff to sell offline, the cost will be high as well. Because they will include salary for sales staff, petroleum allowances, meal allowances, venue renting, etc.
Business Insurance Cost
Besides compulsory fire insurance for businesses with high risks of fire, other types of business insurance are not compulsory but on a voluntary basis. If businesses buy business insurance, they will be protected from damages and losses which might happen to their company. These are product responsibilities with customers, property damage due to fire or theft, interruption in business, etc. Therefore, if you see that there might be risks with your business, buying business insurance to reduce the risks is something you should consider.
The business startup cost for Tax Liability
Governments in all countries never ignore any companies that commit tax evasion. Therefore, once you decide to do business, prepare yourself to pay Corporate Income Tax. In Vietnam, the Standard Corporate Income tax is 20%. For enterprises searching, exploring, and exploiting petroleum, oil, and other valuable and rare resources, the Tax rate is 32% to 50%. For enterprises operating in the high-tech industry, education, journalism, and software development, the tax rate is 10%. The tax rate can be changed from time to time according to the enacted policies. Thus, it would be best if you keep yourself updated with new regulations.
The cost for advisors and the solution to help firms tackle the business startup cost puzzle
While starting up, you will need advice and consultancy from experts and experienced advisors. However, the consulting fee from large consulting firms is always high and not all people will be willing to pay for this, even though the benefits of an advisory board to the success of a business are undeniable. In fact, spending on consulting services is a clever investment. It is never a waste as you will always enjoy the benefit from it. This is because what you buy is not only the solution for your problems but also the knowledge, the lesson learned, and the experience of the expert you are working with. For example, if you had an opportunity to chat with 2 co-founders of Atlassian – Mike Cannon-Brookes and Scott Farguhar, what you get is not only a story about their entrepreneurship journey, but also the experience of their 20 years of starting up and developing their business – the experience you may have to spend 20 years to learn but there is no guarantee that you will get the similar one. If you find the consulting cost too high and difficult to bear, find platforms that connect experts at affordable prices like Kounselly. By joining Kounselly, you will not only receive support from top consultants, but also from a network of experts and entrepreneurs who are always willing to share and support you for mutual growth and benefit.
Summary
The business startup cost in Vietnam, depending on industries and fields, will range from several tens of million dongs to several billion. Understanding your problems and pains, Kounselly is always willing to provide you with solutions to save your expenses, helping you maximize your profit and potential. Join Kounselly and let our experts help you.
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