Running a small business can be exceptionally gratifying, especially when you begin to reap the rewards of all your hard work. There are, however, several hidden expenses that can take the new small business owner by surprise – or, even worse, leave them unable to meet their financial responsibilities.
Here are five critical small business costs. Have a read and use this information to gain a better understanding of the cost of running a business.
1. Registrations and licenses
If you are starting a new business, you’ll need to register your business name and your company. Registering a business name won’t set you back more than $100 but registering a company can rack up fees of over $1,000, depending on the size and nature of your operations.
You may also need to apply for a license or permit to ensure all legal responsibilities are being met. Applying for a license may incur a fee, but if not, it will certainly take up a large chunk of your time.
2. Small business taxes
When it comes to determining the cost of running a business, taxes are a leading expense to consider. As an employee, you paid your taxes – for the most part – through the automated processes set up by your employer’s payroll department. But now, as a business owner, ensuring you are meeting your tax obligations is a little more involved.
It’s a good idea to become familiar with the tax requirements allocated to self-employed individuals and companies. You may also like to find yourself a reliable accountant with extensive experience working with small business owners.
3. Admin costs
All the little things you take for granted when you work for someone – like utilities, the coffee machine, comfortable office chairs, fast internet, and even paperclips – are now your responsibility.
Individually these little admin costs may not seem like much, but add them up over a year, and you are looking at potentially thousands of dollars. So, be sure to include things like stationery, electronics, services, and other office essentials when you budget for your small business costs.
Shrinkage is a term used to describe a reduction in your inventory that results from shoplifting (if you have a shopfront), employee theft, and administration errors. Shrinkage is a huge problem facing businesses, with shoplifting alone resulting in billions of dollars’ worth of loss every year.
There are practices you can put in place to minimise your business’ shrinkage, such as staff training in both customer and employee theft. But, even if you’re not a retailer, there will still be that one team member who steals pens and that one administrator that lacks an eye for detail.
5. Tech repairs and replacements
These days, most businesses rely heavily on technology to operate. This means that your tech expenses will make up a considerable portion of your small business costs. When a computer breaks, a keyboard stops working, or the internet experiences an outage, you will have to pay to get things back up and running.