Starting your own business is a good thing if you are prepared to put in the hard work and hours that will make it a success. Before you can actually launch, there are a number of considerations to take into account, and that includes your budget. However, although there are some obvious costs that you can calculate, there are some hidden ones too, and it is these that can cause the biggest problems if you’re not expecting them. Here are some to look out for.
Permits And Licenses
In order to ensure that your business is above board and legal and that you can trade in the way you want to, you may need to apply for permits and licenses before you can start. If you don’t and it transpires that you do actually need them, then you could even face a fine. These licenses won’t be free, and they aren’t a one-off cost either. You will need to pay to begin with, and then also usually pay for renewals as well. These costs should go into your annual costings sheet so that you can make sure you have the money to pay for them.
If you join any professional bodies, then you will also need to pay for membership, and this again will be on an annually renewed basis. These memberships can help you gain more business, but it’s important to consider how much they cost and how much work they might bring in, it could be something that has to wait until you are making more money.
If you run a business that needs vehicles (cars or trucks, for example) so that you and your employees can go and visit their prospects and clients, then they will also have costs associated with them. Buying the vehicles in the first place will cost money, and you might find it is cheaper to think about shipping car across country, for example, as any saving when it comes to your business is a good thing.
After you have bought the vehicle, or entered into a lease agreement, there will be running costs including fuel and tags as well as maintenance. It can all add up but will be necessary to continue to run your business.
Your Office Space
One of the first things you might want to do when you start your own business is rent a dedicated office space for it. This is not an unexpected or hidden cost, of course; it’s one of the biggest expenses you’ll need to cover, so it should immediately be in your budget. What you might not have thought of, and therefore, could be considered ‘hidden’ is the cost of the utilities that you need within the office. Heating, cooling, water, electricity, gas, and other rates may not be included within the rent, so you’ll need to check, and if they are extras, you’ll have to ensure you can cover them.
If those costs seem too high to you, then think about whether your business truly needs an office, or whether you could, in fact, work from home. You’ll still need to pay your utility bills, but they are the bills you would have paid anyway (and there may be reductions in your taxes if you need to use those utilities for your business), so you won’t be losing any money.
If you need additional equipment for your business, such as tools or computer equipment, then you will need to remember that these will become old and need upgrading over time. They will also need to be maintained and repaired when required. Nothing lasts forever, and even if these costs seem like they are a long way off, they will come about eventually. It’s best to try to put some money aside whenever possible in order to pay for the repairs that will inevitably happen.
If all goes well, you will need to employ people at some stage; when you are very busy, you simply won’t be able to do everything all on your own. However, there are many hidden costs involved when it comes to hiring people. You will need to pay their salaries, of course, but you also need to take into account taxes on top of this, and any benefits they might be entitled to such as 401(k) schemes.
You should also think about what happens when an employee is sick or takes a vacation. You’ll still potentially need to pay them even if they aren’t actually contributing to the business for a little while. Plus you may have to provide uniform, another vehicle, a company credit card, and other perks such as lunch or free coffee. Some of these things are clearly going to cost a lot, to begin with, and others, even if they seem as though they wouldn’t be too much of a strain on your budget, will certainly add up over time. Before you employ anyone, you will need to be completely sure that you can afford to keep them on.
If someone doesn’t pay you when they say they will, or when you are expecting them to, this can have a serious knock-on effect on your business. It will mean that you may not be able to pay your own bills and suppliers, and that can affect your credit and even if suppliers will sell to you in the future. It is a big cost that is very rarely accounted for in budgets and monthly plans, but it is something that can have a seriously negative effect on how you are able to run your business, or even if you can continue to run it.
To combat this situation, it’s important to have money in your account that can be used as an emergency fund. You may also need to speak to your bank manager about extending your overdraft facility, and if this is the case, you should do it sooner rather than later so that you can continue working.