124 | HOW TO WRITE A BUSINESS PLAN
Common Items in a Capital Spending Plan
Here’s a list of common items businesses
need to buy before opening. Note that they
fall into two categories—capital items and
expense items.
Capital items generally have a useful life of
more than one year and can be depreciated for
tax purposes. They include:
• permanent signs, heaters, air con-
ditioners, cooking and refrigeration
equipment
• equipment, including machinery, large
tools, and other expensive items
• racks and display fixtures for retail
selling areas
• office furniture
• leasehold improvements or any
alterations you make to the building,
including walls, bathrooms, and
carpeting
• computers, typewriters, fax
machines, adding machines, cash
registers, phone systems, and other
small equipment you purchase.Expense items generally are shown as either
fixed expenses or costs of sale at the time
they are purchased because they last less
than one year. They include:
• opening inventory (sometimes you
can get a deferred payment schedule
from suppliers, but you will usually
have to pay for many, if not most,
goods before you sell them)
• lease deposits
• tax deposits
• business licenses and permits
• opening marketing and promotion
• insurance
• telephone installation
• utility deposits
• office supplies and stationery
• legal fees, costs to incorporate, and
CPA fees to establish your business
• contingency reserve.businesspeople will add another 10% to
20% of the total as a contingency to allow
for poor guesses and other foul-ups. If you
think you need such a contingency and
haven’t included it already, add it in now.
Add up all the items you’ve listed to get an
estimate of the cash you need to open your
business.
Your capital spending plan should
reflect the exact amounts you will spend
as accurately as possible. For example, it
was okay for Antoinette to use estimates of
costs when she thought about her business
in general terms, but now she needs to
be precise. She should have shopped
around for the best deals by now and