When you’re opening a new business, it’s easy to see the obvious costs, such as rent, advertising, supplies, computer equipment, etc. But what about the hidden costs of business ownership, such as business slowdowns, repairs and maintenance? Though we don’t think of the hidden expenses when planning our business’ finances, they can become an important part of the equation when your business isn’t doing as well. Those expenses can even end up being the missing link between deciding whether your business succeeds or fails. Let’s take a look at some hidden costs of running a business.
Repairs and Maintenance
When you were applying for your business loan, you remembered to include repairs and maintenance, right? When you need equipment, it’s easy to remember to include the cost of the equipment without thinking about installation, routine repairs and maintenance that keeps your warranty active.
It can seem easy to ignore those noises a machine has started making, but if you ignore necessary repairs and maintenance, you can cause more damage to build up. One system is rarely isolated from others, so as one system has problems or fails, it causes more systems to need help down the line. Be sure to budget for repairs and maintenance when you’re figuring out your business finances.
Fees and Licenses
What about fees? When you’re starting out, it can seem as though there are fees tacked on to everything you need to get done like processing fees, statement fees, credit card fees, regulatory fees, and so on. Don’t forget to budget in extra to cover these small amounts that can slowly but surely bleed your business dry.
Depending on where you’re setting up shop and what type of services you’ll provide, you’ll need to pick up any number of licenses from federal, state, county and local governments. Whether it’s a business license, sales tax license or kitchen license, they all take money away from your business. Some licenses, such as a sales tax license, can require a deposit or bond to be sent to the agency in charge of that program. By investigating these fees and licenses ahead of time, you’ll be better prepared to develop an accurate overview of what your business’ finances will look like.
Have you budgeted for legal fees to incorporate your business? Professional services can cost a pretty penny and create a hole in your budget you hadn’t planned for.
Professional services can also involve regular expenses on a weekly, monthly or annual basis. Whether you’re hiring out your advertising and marketing or hiring an accountant to make sure the books are kept properly, professional services need to be planned for in your financial outlook.
Fraud and Scams
Especially when you’re starting your first business, you’ll find a world of services being offered to help set up everything and many of which are fraudulent or scams. Some involve taking care of the incorporation process for a suspiciously low figure, while others appear to be invoices for listing your business in the yellow pages. If you didn’t request information from that company or it seems too good to be true, you should investigate before providing any additional information to them.
Another scam to be aware of is phishing, when you’re contacted by individuals who represent themselves as representatives of a company you do business with who are trying to gather confidential information about you or your business. Once they have this information, they can turn around and use that information to contact other businesses you work with, leading to identity theft and other legal issues.
When you’re starting your business, it’s easy to be caught up in early success or seasonal fluctuations. But what about when business is average or slow? If you’re opening a gourmet ice cream store, you might anticipate lower sales in the winter, but if you’re in a college town, will they be lower in the summer as the majority of students head home for vacation? Knowing the answers to these questions help you plan for known slowdowns, giving you the opportunity to get things done you couldn’t when business was booming instead of worrying about money.
What about slowdowns you can’t plan for? Perhaps your business receives some negative publicity, whether accurate or not. The assembly plant that has been the town’s largest employer suddenly shuts down or reduces operations, forcing your customers to prioritize their spending. By planning to make money instead of breaking even, you’re prepared for the times when you just barely get by.
A Safety Net
As you’re planning your business’ opening, it can feel as though every budget item is eating into your bottom line. How can you possibly plan to save money when it seems as though the money is all going straight back out again? Because you have to if you’re going to succeed. Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” By planning a financial safety net in your start-up costs, it’s easier to get into the habit of having a little something extra set aside to cover unexpected circumstances.
Now that you’ve had an opportunity to consider the hidden costs of business ownership, it’s time to plan for these expenses. If you’re preparing to apply for an SBA loan to get your business off the ground or keep it in operation, download our free ebook 8 Challenges Associated with SBA Loans to help you through the process. Take some time to investigate the many services Florida Capital Bank offers to boost your business’ finances and success. Contact us for more details.