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Small Business Development Center Network

Total Project Cost

One important question of the business planning process is the total cost of implementing the project. The question deserved special consideration at the start and throughout the process. It is considered before starting a business as one of the three major questions in the Three-Way

Fit model: Do people want or need the product? Does the business fit with my lifestyle? Can I afford the business? It is considered during the planning process for budget and financing purposes.

Total Project Cost is the first step to calculating the cost of a project and determining from where funds will be obtained.

Total Project Cost
 
 
 
 
Project Element
Estimated Cost
External Injection (Loan /Investment)
Equity Injection
 
 
 
 
Land
$20,000
$20,000
 
Building
$50,000
$50,000
 
Equipment
$10,000
 
$10,000
 
 
 
 
Working Capital
$20,000
 
$20,000
Total
$100,000
$70,000
$30,000

Words to Know:

  • Project Element - This column denotes all the assets (whether owned or not) that will be utilized for the project.
     
  • Estimated Cost - Estimated Cost
     
  • Bank Loan - This is the balance of the estimated cost and equity injection, the amount you seek from lending or investing institutions.
     
  • Equity Injection – This is the owners' investment -- the amount of capital that you own that will be dedicated to the business; this capital can be in the form of cash, inventory, or fixed assets.

Determining Capital Investment

Answer the following questions to help you complete a total project cost:

What types of assets – land, property, equipment, or supplies – would you need to start the project?

How much capital would you need to start the business? The amount includes fixed assets and working capital (start-up expenses and 2-3 months of expenses).

Where would you obtain the capital?

Would you need to borrow? Why is this loan good for your business? How will you repay the loan? When will you pay it back?

You can use the following chart to write down preliminary figures for the total cost of your project: