Every business has two general categories of expenses. You will have fixed costs which are one-time costs that you must pay once or once in a great while. Regardless of how many jobs you complete, your fixed costs stay relatively static. Variable costs, which are ongoing expenses, fluctuate as the amount of work you perform increases or decreases. For practical purposes, if your moving company is idle, your variable costs are zero, but your fixed costs remain constant. How you start your business can also affect your costs. For example, you might choose to buy a franchise or start your business from scratch.

Franchise vs. Startup

If you want to start your own moving business from scratch, you must have emotional and physical fortitude. You must be willing to take risks and let your passion drive you over the many hurdles that you will face. Starting your business will require much time in the planning stages and even more time managing your business and winning customers.

As the owner of a startup, you must learn all the basics of the moving business and learn how to manage a business at the same time. As a new arrival in the moving industry, you can expect to make numerous rookies mistakes that can cost you in terms of time and money. In other words, you should include the costs of the “learning curve” as part of your financial planning.

You can avoid the expense and hazards associated with a new entrant into the moving business by buying a franchise from an existing moving brand. Becoming a franchisee can cost much more than organizing a startup, but you get many benefits as a result of your investment. For example, a franchisor can provide you with training and education, instant brand recognition and marketing support. Becoming a franchisee isn’t for everyone in the moving business, but you should look into leading moving franchise brands as part of your preparation.

Initial Costs

Most moving businesses share some common needs. A truck or van, for example, is needed to transport furniture and other possessions from one location to another. Supplies such as bubble wrap, boxes, tape and dollies are also needed to safely serve customers. Additionally, you will probably need blankets, tie-downs, ramps and hand trucks to carry out your mission.

Movers must operate in all kinds of weather, including extreme heat and cold, and be prepared to operate in snowy and rainy conditions. Long distance moves can increase your exposure to extreme conditions. Aside from adequately wrapping and securing the belongings of your customers to survive harsh conditions, you must also prepare your vehicle.

Your moving firm depends on having enough cargo capacity to efficiently serve your target market. Although you can save a considerable sum by acquiring used vehicles, be careful not to buy a vehicle that might require a large amount of initial maintenance and repairs. Used vehicles will also help you save on your insurance premium, another major initial and recurring expense for which you must prepare.

Other costs that you will incur as you start your business include fuel and vehicle maintenance. You will also need to spend money on a computer and printer, security system and a phone and other fixtures for your office. Marketing expenses include creative services for the design of your logo, signage, business cards, brochures and fliers.

You should create a recurring line item in your budget for your marketing effort, including expenses for content and social media marketing and traditional print and broadcast advertising. You will also likely need to either buy software for bookkeeping and scheduling or subscribe to cloud-based application subscriptions to fill those roles.

Payroll

Your moving business depends on labor to pack, transport and unpack your customers’ possessions, so you should plan on hiring at least one or two people to get your business started. You might need to hire people to attend to office tasks like bookkeeping and answering phones as well. As demand for your products and services grows, you will need to add more workers to your staff. Regardless of whether you hire traditional employees or try to staff your company with independent contractors, you must prepare for the expenses and taxes associated with recruiting, managing and paying your team.

Insurance Rates

Without insurance, you and your company could be held liable for customers’ property that gets lost or damaged during a move. In fact, you can expect people to ask you if you have liability coverage for your business before they commit to the use of your services. You should also consider having general business insurance that covers damage to property owned by your business and accidents and injuries that occur on your premises.

Start shopping for business insurance by asking other movers what insurers they use. Also, you should get quotes from several providers as part of your search for the lowest rates. You can often save money if you buy all your insurance from the same insurance company. For example, you might have a chance to buy your vehicle coverage, liability coverage and business property coverage in a bundle to get a discount.

This chapter has discussed many aspects of the costs associated with starting and operating your moving company. You cannot properly price your products and services or raise funds from banks and investors without a solid understanding of your expenses. Make sure you have included all your expenses, including selling costs, licenses and fees, computers and equipment, payroll, administrative costs, and a cash reserve for emergencies.

When you have a reliable estimate for your first year of operation, including sales and expenses, you can arrange to have enough money on hand to support your company through its first year. As you begin operating your business, you should continually monitor your revenue and expenses to improve your estimates. Failure to aggressively monitor your capital requirements can jeopardize your startup, leaving it starved of cash.

After calculating your prices, you can use your sales projections to estimate how long your company must operate before earning a profit. In the interim, you must use have enough cash to operate. If you have an insufficient of cash on hand, you can borrow money from a bank, credit union or other financial institution. You can also apply for a small business loan or search for partners or investors.

As you look for funding, make sure you consider modern options such as crowdfunding, angel investors, and business incubators and accelerators. These unconventional fundraising tactics have proven successful for many startups in your industry because they help overcome barriers associated with having sufficient business and personal credit. Your business plan will help potential investors learn about your startup and decide if they want to invest. In return, you can offer investors equity in your company or an ongoing share of your profits.

To conclude, investing the necessary time to learn about the types of costs your business faces will help you make adequate financial preparations. Your decision between opening as a startup or buying a franchise directly impacts the amount of money you need to get started as do accurate estimates of your initial and recurring expenses. The accuracy of your estimates can help you avoid unpleasant surprises while establishing pricing or searching for financing.

Much of your success as the owner of a moving company depends on accurate cost and revenue estimates. As you begin operations, you must keep accurate records so that you can use your bookkeeping data to verify or modify your estimates as you gain real-world experience. Although spending much time planning the financial aspects of your business might seem frustrating or boring, your effort will pay off when you have sufficient cash reserves and operating capital to carry you until you start earning a profit.