Thinking of running your own business? Many first time business owners can fail to budget correctly and end up borrowing a lot more money than they hoped. Here are some of the hidden costs to factor in when coming up with a budget for your startup with tips on how to reduce these costs.
Insurance
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You don’t have to take out business insurance in many cases – employers liability insurance is compulsory for anyone taking on employees, but many other insurance schemes such as malpractice insurance aren’t mandatory. That said, insurance is very much recommended to protect you from even more costly lawsuits. You can often lower business insurance by shopping around, as well lowering risk of lawsuits within your company (this could include having a good training programme in place and being strict on health and safety).
Health and safety
Health and safety is vital in any business. This could include supplying safety equipment or protecting against falls with features such as loading dock safety gates. Fire safety is also important – you should budget in the cost of a fire extinguisher and smoke alarm. You can’t really skimp on these features, however arranging a health and safety audit may notify as to which features you really need and which are unnecessary.
Security
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Keeping your business premises secure is also important. This could include buying CCTV and a burglar alarm. On top of this, you should consider the cost of security software subscriptions so that you’re digitally protected from thieves too. Shop around to find the best security features for your money.
Accounting
Keeping on top of bookkeeping is vital – without clear records of your finances, a tax inspector won’t know whether you’re paying the right amount of tax. Many company owners choose to buy accounting software to speed things up or hire an accountant. This could be another cost to budget in, which you can also reduce from shopping around (small companies may not need an accountant and may be able to make use of free accounting software).
Hiring employees
The hiring process can also be expensive, especially if you’re taking on a recruitment agency to find you employees. You may also have to pay for to put job ads in newspapers and on online listing sites. Having a strong job vacancy marketing programme in place is important, but you should think twice before using a recruitment agency or using an expensive job listing site.
Staff absence
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As an employer, you need to be able to provide pay to employees even when they’re absent, providing they have a valid reason. Factor in holiday pay and sick pay when budgeting employee expenses. Make sure to set clear rules when it comes to holiday and sick pay so that employees don’t take advantage.
Staff incentives
You may also want to contribute money towards employee incentives to give an extra reason to work at your company. This could include pension contributions, bonuses for overachieving and the cost of employee perks such as company cars or work phones. Even the cost of supplying snacks and coffee is something worth factoring in. It’s worth having some incentives in place, but you don’t have to go overboard – only give away what you can realistically afford.
Legal costs
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Lawsuits can be deflected by taking out insurance and introducing prevention measures such as health and safety features. That said, there may still be other legal costs you want to consider such as consultations with solicitors in regard to business structures and trademarks as well as potentially getting contracts professionally written. Hire a solicitor who you trust and doesn’t charge a fortune – many pay by the hour so that you can budget effectively.
Repairs and maintenance
Machinery will break and business vehicles will have to be serviced. Make sure that you’ve got a pot of money to deal with these emergency repair costs. You may also want to hire a cleaning company to keep your premises regularly cleaned. It’s possible to do repairs and cleaning yourself to save costs, but may not always be practical. Besides you may still have to pay for the tools if you’re doing it yourself, which could make up costs.
Wastage
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Every business has wastage whether it’s spilt drinks in the beer tray within a bar or excess metal in a tool-producing factory. Make sure to record this material wastage and make an effort to reduce/recycle it. New technology may be help to reduce this wastage.