Costs People Often Forget When Setting Up Their Own Business
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Hidden Costs of Business
Making the decision to set up your own business can be exciting, particularly if having your own company and being your own boss is something you’ve always dreamed of doing. With no boss to answer to, you get to make all of the decisions. However that also means that you are responsible for every single aspect of making sure your business is a profitable success, that it runs smoothly, and that everyone gets paid on time! There can be a lot to remember, especially if you’ve never run your own business before, and underestimating the costs your business will absorb is a key contributor to business failure. To help you on your way, here are some of the costs people often forget when setting up their own businesses, and how you can minimize them so that they don’t affect your business success:
The Cost of Utilities
When choosing their business premises, most entrepreneurs will have a budget in mind and stick to it, ensuring that their monthly rent doesn’t cost more than they can afford. However there are other costs involved in running those premises on top of the cost of your rent that many first time business owners forget to factor into their expenses. One of those is the quarterly charge for your utilities, such as water and electricity. You can compare energy prices to minimize these costs, but with energy prices rising year on year, it is important to include these expenses in your budget if you can. A good rule is to look for a leases space that includes the utilities in the cost of your rental, if possible, so that you aren’t surprised by any hidden expenses at a later stage. Don’t forget that you will also have to factor in the cost of your internet (this is rarely included, even in fully serviced packages) and the costs of furnishing your business space too.
The Cost of Insurance
Many small business owners think that they can’t afford insurance, and it is often the first thing that first time business owner’s jettison when their expenses begin to spiral. However, in reality, if your business is low on cash then you probably can't afford not to have insurance! Employer liability and public liability coverage will protect you should one of your team members or customers be hurt in an accident on your premises: if they choose to litigate against you then the costs involved in this without insurance coverage could drive you to bankruptcy. Not sure you can afford the coverage you need? Don’t be afraid to shop around and, if possible, negotiate with the providers to find the best possible rates.
Hidden Staffing Costs
If your need support to run your business and choose to hire a team member or two then you know that you will need to pay their wages (most employees like to get paid!) however when calculating the salary you can afford to offer, you should also include the costs of providing them with insurance and other benefits if they are working for you full time. Unless you are financially savvy, and have a background in accountancy, you may then need to hire a further member of staff (probably contracted on a part time basis or outsourced from a larger company) to manage your payroll. All of these extra expenses can quickly add up. And of course, you shouldn’t forget the most significant staffing cost of all – the cost of paying yourself! When working out what you can afford to pay yourself each month, you should also remember that you will have tax to pay on that income/your business revenue: Rather than be hit with a huge bill you can’t afford at the end of the year, put the appropriate amount aside each month at the same time as you pay your own salary.
Running your own business is incredibly exciting, and there are endless possibilities to make your business a success: however unfortunately there are also several pitfalls that could hinder you on that road to success. By calculating your start-up costs carefully, and taking the time to factor in every conceivable expense (no matter how small) you will be much more likely to make it through the difficult times and end up with a profitable business that you love.
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- With no boss to answer to, you get to make all of the decisions.
- There can be a lot to remember, especially if you’ve never run your own business before, and underestimating the costs your business will absorb is a key contributor to business failure.
- When choosing their business premises, most entrepreneurs will have a budget in mind and stick to it, ensuring that their monthly rent doesn’t cost more than they can afford.
- Employer liability and public liability coverage will protect you should one of your team members or customers be hurt in an accident on your premises.
- By calculating your start-up costs carefully, and taking the time to factor in every conceivable expense, you will be much more likely to make it through the difficult times and end up with a profitable business that you love.