Starting your own business and becoming your own boss is something many people like the idea of. But, the idea can be very different to the reality. For example, if you underestimate the costs of setting up a business it can lead you straight down the road to failure. So, although the thought of running your own business may be nice, it’s important to plan ahead before you take the plunge. Here are a few costs you might run into while getting your business started.
They may feel like pointless costs to you, but it’s important to have the right paperwork in place before you start trading. It could mean you have to pay for licenses, insurance or even help from Your Company Formations to get everything in order. You may need to pay for permits, or even fees to affiliate your business with certain well known organisations. Remember, these are usually all fees that will need to be renewed every annum so don’t think of them as one-off costs. For example, In the US, many people form an LLC in Wyoming because of its privacy and liability shielding.
It’s important to have a dedicated space where you can get your work done. Even if you’re setting up a small business from home, the dining room table isn’t the best choice to set up your work desk. Whether you’re paying to rent out office space in a commercial building or you’re setting up a space in your own home, there will be costs involved. It’s a good idea to work out what you can afford before you go viewing office spaces. When you’re starting out, the cheaper the better. You could always consider a personal loan for self employed workers as an alternative means of finance for an office space out of your budget. You may also be able to find free office space with government schemes for start-ups in your area.
Many new business owners factor in the costs of buying the materials for their products and services but forget all about the equipment they’ll need to invest in to produce these products. The cost of equipment adds up quickly and you’ll never know when a piece of equipment will need replacing. It could be something as simple as paper and ink, or something more expensive, like an industrial machine. You can save money on equipment by buying second hand when you’re starting out and upgrading as you make more money.
Hiring employees isn’t something small businesses focus on during the first year of trading. However, it’s not impossible for the business to take off quickly and for demand to grow to a stage where your current employees or you alone can’t manage anymore. No business should try to run before it can walk, but if it’s just a case of hiring a few extra hands, it’s something every business owner should be prepared for. If your business is likely to attract more custom during one particular season, you may want to think about preparing to hire temporary staff or freelance workers on a short-term contract. That way, you can save money and meet customer requirements.
This is especially important for retail businesses. There may be times when you have a shortage of inventory through no fault of your own. Perhaps your supplier takes longer than usual to make a delivery or one of your employees sends additional items to a customer by mistake. Of course, every retail bricks and mortar store is susceptible to theft and you may find that you’re missing items after doing an inventory check. Unfortunately, this results in unnecessary cost that every business has to experience and few plans for.
There’s a reason many businesses don’t accept cheques anymore. The last thing you want to find is that you’ve fulfilled your end of the bargain but your customer’s payment has bounced. These days payment delays can happen because the bank withholds certain amounts until something is verified or because a client forgot to fill in a vital payment detail, like a card expiry date. Payment delays can mean that your business is charged for late payments or doesn’t have quite enough to cover employee’s salaries. It’s a vicious circle and one that any business should be prepared for.
Hiring a Professional
Although you may think you can do everything to get your business up and running, there will come a day when you need the help of a professional. Perhaps you’ll need a financial advisor to help build a financial forecast for your business plan. Maybe you’ll require a website designer to ensure your customers have a smooth experience when buying from you online. At some point you will need the services of others, and they can be costly.
Always plan ahead before you start a business from scratch.