You need to know the hidden costs of running a small business in order to survive.
Most small business owners aren’t strangers to unexpected business expenses, especially in 2021 when the small business landscape has major uncertainties. Typical small business expenses include inventory, supplies, and other ongoing costs of a business that go directly into your products or services. However, some business costs are hidden and hard to notice.
Did You Know? A small business startup takes on average around $30,000 to get off the ground and running. Startup costs can pile, so it’s important to be prepared and know what to expect.
We are here to help small business owners consider all business expenses- especially the less obvious ones. There are plenty of ways to plan for these expenses throughout the course of the year. The best way for a business to be prepared for unexpected expenses is to be in a solid financial state. Limitless Investment and Capital small business accounting services are helping small business owners discover hidden expenses and plan properly.
6 Hidden Costs of Running a Business
- Expensive Loans: Most entrepreneurs need some sort of loan to finance a startup. If you don’t have any business experience or an established company with the right tax and revenue documents, that loan is most likely going to be based on your own personal situation. Thus, if you have a bad credit score, you’re going to get some pretty bad terms on the loan. You need to be aware of the hidden cost that is loan interest.
- Employee Benefits and Perks: It’s not enough to calculate what you’ll pay an employee in terms of salary. If you don’t account for taxes, benefits, and perks, you’ll quickly find yourself in a hole. The overall cost can run from 1.25 to 1.4 times the basic pay. The increase is due to things like employment taxes, workers’ compensation, and fringe benefits (healthcare, retirement, vacation, etc.).
- Shrinkage: For companies that sell physical products, there’s always the risk of shrinkage. Whether purposeful or unintentional, shrinkage actually costs retailers an estimated $45 billion per year in the U.S. alone.
- Insurance: You may not need a lot of insurance starting out, but as time goes on, the need for various insurance policies increases. These include things such as general small business insurance, liability insurance errors and omissions insurance, worker compensation insurance, property insurance and cyber insurance.
- Legal Fees: Most entrepreneurs don’t go into business thinking they are going to generate a bunch of legal fees. That doesn’t mean they don’t exist. In certain cases, legal fees might be the number one hidden cost.
- Permits, Licenses and Dues: It all starts with paper – the permits and licenses you might need to do business in your community. These are rarely one-time expenses. Factor in how often they need to be renewed and what the renewals will cost. You should also set aside a little money for membership dues with networking organizations like your local chamber of commerce or industry/professional groups. Participation in these groups can keep you up-to-date on the latest news and can provide you with great exposure, but be selective about the groups you join because annual memberships can easily run hundreds of dollars.
Can You Handle the Cost of Business?
It takes money to make money. In other words, you need money in order to make more of it. Whether you’re planning on starting a business, recently launched a company, or are in the growth stage of building a brand, you have to be aware of just how important money is in the equation. Specifically, you must be aware of the hidden costs.
Hiring an Accountant Can Help Identify Hidden Costs and Plan Properly
Limitless Investment & Capital small business accounting experts are helping small business owners manage their monthly business expenses. We help small business owners create a budget to incorporate the unexpected expenses that occur month to month. Talk to our financial professionals TODAY for advice on unexpected small business expenses.