Recent government figures indicate that over half of new businesses closing their doors within 5 years of starting up. For a large percentage of the enterprises that don’t make it to the 5 year mark, a major factor in their failure is the amount of barriers to growth – many of which result in delaying profitability – or even excluding the possibility of it.
And of course, every penny counts when it comes to running a successful company. In most industries there are a few ‘hidden’ or unspoken expenses that many people won’t be aware of when they start, and those extra costs can often push businesses to the brink if they haven’t properly prepared for them.
One of the things successful businesses have in common is a high standard of money management. There needs to be enough money in the bank to cover salaries, supplies, rent and all manner of other expenses which many people fail to anticipate when they first start trading.
By preparing for the unexpected and having some financial reserves set aside you’ll drastically reduce the odds of an unplanned financial hit having a major impact on your business.
Here we’ll look at some of the more common unexpected expenses for any new business, and hopefully help save you any surprising bills in the near future.
Trade Fees and Licensing
Some industries require a licence for you to legally do business, which can be quite expensive to acquire. You’ll need to figure out which licences you need, how much they cost and how often they will have to be renewed. Occasionally this will involve hiring a professional to help ensure everything is in place, which can add to the expense.
Joining a trade association or a chamber of commerce can be a great way to network and pick up new business, but they also come with annual membership fees. These are often quite high, so try to be selective if you decide to go down this path.
Picking up decent insurance is the most important way of preventing any major financial disaster impacting on your business, and while the initial cost may seem like a burden you’ll be thankful for it if there’s ever an accident in your company.
If you have employees then employer’s liability insurance will help cover any costs if there’s an issue with a member of staff. If you’re dealing with the public, either by visiting their property or having them come to you, public liability insurance is a must. There is a potentially huge range of costs involved if a liability claim is made against your business by a member of the public. These can include legal fees and any compensation, so finding a solid policy could potentially save your business a fortune.
Keeping a business operational is often more expensive than people first anticipate. Most people factor in the cost of their office rent and the furniture, but there can be many more expenses that only start to reveal themselves once you’re settled in.
Utility bills can add up pretty quickly, and you can expect to be paying for electricity, heating, water, internet and your phone, as well as other things like building fees and office cleaning.
Routine office equipment such as pens and paper will have to be topped up regularly, not to mention more expensive items like printer ink and replacement computer parts.
If you have staff then there’s a good chance you’ll need to pay for sick leave, which can involve a drop in income in the short term and potentially hiring someone short-term to cover any expended leave. This is a tricky one to anticipate, but it’s vital to have a plan in place.
Running a small business is a challenge at the best of times, so the last thing you’ll want is a big expense threatening to have an impact on your staff or your profitability. As the old saying goes, if you fail to prepare then prepare to fail.
Make sure you’ve properly researched your industry so you know exactly what you’ll need in terms of licensing, get adequate insurance in place early in case there’s an incident, and try to keep some cash reserves to cover unexpected bills and other expenses. That way you’ll be able to give your business the best possible chance of success.