Hidden Costs of Running Your Own Business
If the thought of being your own boss is something that’s always excited you, why not take the leap and start your own business? It’s easier than ever to do and if you understand the costs involved then there’s no reason why you can’t go on to be a huge success.
Permits, Licenses and Dues
Everything starts with paper. You need to make sure that you get all of the permits and licenses you need to operate legally. This can be expensive, but when you’ve covered the initial cost, you’ll soon find that everything becomes way easier. You also need to set some money aside so you can cover your membership to any organisations you might need to sign up for. By participating in groups like this, you can then be kept up to date with the latest changes in your industry and you can also network much more efficiently. Another bonus of signing up to an organisation is that you’ll get member-only discounts on insurance, credit cards or even supplies, so this is well worth keeping in consideration.
Office Space
Do you really need a commercial space? Before you go ahead and rent, think about what you actually need to operate your company. It may be worth renting a temporary space, or even working from home. This will make running your business way cheaper and it will also free up more room in your budget.
A lot of business owners make a list of all the equipment they need to operate their business before launch. This is great, but you may end up forgetting about the smaller expenses. This can include basic equipment like paper, pens, scanners, desks and even chairs. If you want to save money here, then you should certainly think about buying products second-hand. There are so many websites which give you the chance to do this and sometimes you may even get a warranty with them too. You should also avoid jumping to the latest model if you don’t actually need it. For example, if you need a mobile phone then choose one that’s able to hold its charge and get a good signal. You probably don’t need all of the additional high-tech extras, and there’s a high chance that you won’t use them even if you did. When purchasing items that are imperative to your business operation, it does help to spend a bit extra to ensure a quality product. This is especially the case if you need the equipment to serve your customers. So if you need a 3D printer, opt for the Creality CR-10 Max, or if you need a laptop so you can provide your customers with updates regarding their order, then shop for a new model that focuses on reliability.
Employees
Your employees are the backbone of your company. Salaries, medical leave, health insurance and even training costs are all factors that you need to consider. If you don’t invest in your team by providing them with a good wage or even a clean working environment, this could mean that you have a high turnover, and this will cost you even more in the future. If you want to get around this then it helps to offer your team perks. These don’t have to be pricey, and sometimes benefits such as having a flexible schedule can go a long way. If you’re providing your team with health insurance then negotiate with your provider annually, so you can budget for other fees more efficiently.
Insurance
It’s mentioned above that you probably need to obtain some sort of health insurance for your team. That being said, you also need to try and pay for your own business insurance too. At a minimum, you need to have public liability and employer liability cover. Having insurance for negligence, illness and injury will help you out as well. Saving money here isn’t difficult, and sometimes all you need to do is negotiate with your insurance provider. If you have a good record and have gone a long time without making a claim, then try and ask them for a lower rate. Your business is important to them, and if they think that you’re planning on leaving then there’s a high chance that they’ll try and give you a better rate. You also need to review your coverage annually so you can see if you still need the policies you’ve chosen.
Shrinkage
Shrinkage is when you lose inventory between purchasing it from the supplier and delivering it to your customer. Issues like this can happen for a huge number of reasons. You may find that you end up short on a shipment from a vendor, or that your team make picking errors. Theft and damaged goods are also another reason why shrinkage happens. If you need to safeguard yourself against issues like this then it helps to have an inventory management system. Barcodes and scanners are the way forward, as they can help you to maintain real-time data. They can also help you to pinpoint the exact moment an item goes missing so you can protect yourself against it happening again.
Payment Delays
If a customer forgets to pay, or if the bank chooses to hold your transaction then this can cause you major issues. Payment delays can hurt your bottom line, and this is especially the case when payments are necessary to cover the cost. Overdraft charges can also eat away at your credit rating too, and this can cause you even more issues in the future. To stop things like this from happening, you need to set some payment terms with your customers. You also need to try and hold them accountable for not paying too. 30 day-terms can work for bigger businesses, but when you’re a smaller business you can’t be waiting a month to get paid. If a customer does happen to pay late then don’t be afraid to pursue them. It may also be worth chatting with your bank about getting some kind of overdraft protection too. This may involve a fee, but it will be way less expensive than having to deal with bounced checks all the time.
Time
Your time is a very valuable resource. You cannot afford to waste it at all, so think about it, are you spending too much time on tasks that could be outsourced? If so, then explore this as an option. Freelancers are very reliable, and they often have favourable payment terms. Another benefit of hiring a freelancer is that you won’t have to insure them, and they’ll pay for their own tax too. If you aren’t quite sure how to hire a freelancer then there are tons of sites available that are designed to help, and some of them even come with payment protection too. This ultimately means that if they don’t deliver, then you will be completely covered.
Professional Services
As mentioned above, sometimes you may need to outsource your staff. This is especially the case when it comes to professional services. Sometimes accounting and even legal fees can run into the thousands, but they are worth their weight in gold. Legal professionals are able to untangle any red tape that you may come across when running your business and they may even be able to translate tax codes too. This will make it much easier for you to navigate the process and it will also help you to maintain a much more accurate payment inventory. If you need to save money here, then try and negotiate with the professionals who you work with to try and keep your fees as low as possible. It may also help to have your professional lawyer handle the more difficult legal tasks, and then hire someone with less experience to take care of everything else. This will save you money and it will also make it way easier for you to stay on top financially.
Credit Card Fees
If you run a small business, then you have to be so careful about using a credit card. If you cannot pay your balance in full every single month, you may end up with debt that is completely unmanageable. You may even find that you experience high-interest rates and even reliance too. It’s safe to say that this is a position that you don’t want to be in. If you need to get around this then it helps to do your research so you can find the best rates right now. You also need to find companies who can offer you the best rates too. Some may give you discounts if you make cash payments, and others may give you travel incentives. Either way, the type of business you own will ultimately decide which terms you should be looking for. If you are reluctant to take out a credit card, then consider looking into other forms of business financing. Loans tend to have much lower interest rates and you may even find that they’re easier to obtain too.
**This is a Contributed Post