Some costs are obvious when starting a business such as buying equipment and recruiting employees. However, there are other costs that can often catch budding business owners off guard. You often don’t think about them until you do a review of all your actual expenses. Here are some of those hidden costs that are worth including in your startup budget.
Licenses, certifications, and permits
Certain businesses require you to apply for a license or become certified first. This may involve taking a course or passing an exam. An example would be earning your real estate license. In other cases, you may simply need to pay for a permit – for example, to open a bar that plays music you’ll need a music license and an alcohol license. These licenses are usually a legal requirement and choosing to operate a business without them could result in costly fines. Before applying to obtain the license or permit, verify it will meet the requirements of the location you want to open a business in. Earning a real estate license in the United States may have different requirements than the United Kingdom.
You may want to take out insurance for your business. Some types of insurance are required for businesses. For instance, if you’re hiring employees, you need to take out employers liability insurance. Be sure to find a company that is familiar with your area’s regulations and laws. Other types may be optional but recommended such as property insurance if you’re opening a shop and want to protect it from theft and vandalism. This is a small extra cost that you’ll need to budget for every month if you’re paying your insurance monthly.
If you are contracted to provide services or products, the contract may require you to have certain types of insurance. In providing training to certain organizations, before signing any contracts, they wanted to know if I had insurance. Fortunately, I did.
Most business owners hiring employees for the first time focus only on the cost of their employees’ wages, however, there are many other costs to consider. These include sick pay, holiday pay, pension contributions, overtime pay and company bonuses. You don’t have to offer all these perks, but having certain benefits in place can serve as a hiring and retention incentive.
Being self-employed means you have to be in charge of paying your own taxes. It’s worth putting aside money each month to contribute towards your tax bill at the end of the year. If you don’t, you can end up spending the majority of your earnings and end the year with a huge tax bill to pay. Because you spent the money, you won’t have any funds left to pay the tax bill. I’ve seen this happen to business owners far too often.
You may also want to budget for the cost of hiring an accountant. While you can do your bookkeeping yourself, many business owners find it easier to get a professional to do it for them so it’s done accurately.
To cover the cost of starting a business, many people take out a business loan. What a lot of business owners overlook is the cost of paying back this loan. On top of your monthly repayments, you’ll likely have to pay interest which may rise as time goes on. Make sure to budget for these loan repayment and interest to avoid any missed payments. If you do hire an accountant, they can stay on top of this for you.
As a business owner, you will need to pay careful attention to where your money is going. Start each year with a financial plan that includes all your projected expenses including those listed here. To avoid having to pay out more then you have to, be careful not to overlook anything. Here’s to YOUR success!