It can be exciting to start up a new business but developing a business plan that has an accurate budget can be daunting. A good rule of thumb is calculating your first-year budget as accurately as possible in your business plan and add 20% onto this amount. You will be able to use this money on unexpected expenses that will pop up throughout the year. There are many hidden costs of running a business that can come up very quickly and unexpectedly.
It starts with paper – the permits and licenses you need to do business in your community. A number of different considerations could affect your business licensing fees, such as federal industry regulations or other local policies that pertain to your profession. The physical location of an enterprise and the number of different jurisdictions in which it conducts business also affect how much government agencies charge for a business license.
Office Space and Utilities
Ask yourself if you really need the space? Sometimes a home office can work simply fine for many startups, but other regulations might require you to have something more official. Before renting office space or purchasing property, think about how much space you need now and what you will need once your business starts to grow. Does your business require more than a home office can provide? Will temporary office space work? Also, if you do need a space does it need to be large? Large facilities require more lighting, heat and air conditioning costs, which could be costly for operations in weather zones that are extreme.
Shrinkage is a loss of inventory at some point between its purchase from your supplier and its purchase by your customer. No one plans to lose inventory but causes for shrinkage can include short shipments from a vendor, picking errors that lead to customers receiving more than they ordered, damaged goods, or theft. To save money, you can use an inventory management system that uses barcodes and scanners to reduce the risk of shrinkage and enable you to maintain real-time data.
Lost revenue from shrinkage is not the only financial pitfall that can hit small businesses. Payment delays can hurt your financial bottom line, especially when the payments are expected or necessary to cover costs. To avoid this, set payment terms with your customers and hold them accountable.
Government agencies require the use of surety bonds in a number of different industries, especially those that offer services to consumers. Surety bond regulations are put in place to keep unqualified professionals from accessing certain markets, thus deterring unethical business practices. After applying for a bond, business owners might find themselves needing to pay a premium that could cost from a few hundred to thousands. The quote will depend on how much bond coverage a business needs combined with the owner’s or owners’ credit score. For business owners who cannot pay the full premium price upfront, many surety bond providers offer financing for them.
Finding the right kind of professional help from the beginning is a must for any new business owner or a professional. Hiring an accountant to manage your finances and prepare your taxes is a better idea than trying to keep track yourself unless you plan to run an extremely small operation. Finding a lawyer that has experience in your industry can also prove beneficial. To save money, try negotiation to keep fees manageable.
Credit Card Fees
Can customers buy your product or service with a credit card? You should expect to pay roughly 4 percent of total charges in vendor fees. Small businesses also need to very careful about using credit to finance expenses or provide cash flow. If you can’t pay your full balance each month, you can easily accumulate unmanageable debt due to late payments, high interest rates and continued reliance on these accounts.