The accuracy of your assumptions on revenues and costs will determine the business case for your startup.

Hence, it is critical that all cost elements are identified, and the accompanying costs are estimated and accounted
for.
In the initial phase of the startup, it is important for the entrepreneur to create an excel sheet with all possible cost
categories. This should be done on a month-to-month basis to get a better view on the month-by-month cash flow
needs.
Costs should be marked broadly into the following categories:

1. Capital costs [e.g. computers, servers, furniture, etc.

2. Operating expenses or opex
Fixed opex [e.g. rent, salaries, etc.]
Variable opex [printing, marketing, travel, etc]

Suggestions:

Before starting to estimate costs, invest time in developing a good excel sheet with all possible cost heads
identified. Instead of using absolute numbers, put formulae so that one change in the base figure can reflect
accurately across the entire plan.
Break costs into as granular level as possible. E.g. while estimating capital costs, under Servers instead of
putting a number for that month, break it into number of servers in one row and cost per server into another
row, with the result of that calculation into the third row. This way, you can make adjustments to the cost per
unit or the number of unit without having to worry about making the change everywhere.

Once you start writing down the different cost heads under these three categories, often you will realize that there
are many more cost heads than you had thought without putting them down in an excel sheet. Once you start
putting things down on an excel sheet, you are able to get a good view of how things are going to progress. E.g.
in the excel sheet once you realize that the number of people is increasing, you may realize that the office space
may be inadequate and hence you may need to budget for not just new & bigger office rent but also for capital
costs like brokerage, furniture, etc.
One of the highest cost units is likely to be salaries. While estimating salaries, it is important to account for hiring
costs [usually I month salary or 8.33%]. If the attrition rate in your industry is high, you should account for more
hiring costs.
Most entrepreneurs go wrong in estimating their people needs, and assuming that they would be able to manage
the business with lesser people than practically required.
While estimating people needs, rather than putting down an amount, put down first all the designations on which
you are likely to need people at the growth stage. Then in the column section, put the number of people you
would need in each designation and at what stage. E.g. while you may have identified Chief Procurement Officer
or CPO as a designation for an e-comemrce company you may not have plans for such a person for the first 18
months, in which case enter 0 in the number of people column against the CPO.
In a row below each designation, enter the per month CTC or gross salary. And below that row would be the
result of multiplying the number of people for that designation by the monthly salary for that person. See example
below:

January February March April

Customer 1 1 1 2
support manager
CTC pm 25000 25000 25000 25000
Total 25000 25000 25000 50000

Important:In the initial phase you will be resource starved and will therefore manage with very few
people than ideally needed. Even if you are able to multi-task and manage the operations with very few
people, it is often not scalable beyond a point. Any case, the business case is to be made with the full
cost structures as they would apply when the business is at scale.To explain this further your
business plan should take into account all possible cost structures, even if you are not currently spending
them. E.g. you may be working out of your home, or in some cases not even taking a salary. But
operating without a salary or operating without an office is not really a long-term option. Hence, for getting
a realistic picture of your business case and profitability, it is important to account for all possible cost
structures.
Separately, when you work out your operating plan for the first phase you will eliminate or reduce the
expenses as they would be actually applicable.

In some businesses the cost of unsold inventory, damaged goods, etc. also need to be accounted for as they can
significantly impact the business case.