If the idea of running a small business is appealing to you, you should go into it with some knowledge of the expenses that go along with running the business. Part of figuring out if your business would be successful is figuring out how much it would cost you to run it.
After all, no business would stay afloat for long if it incurred more debt than it made in profit. Below is a list of five small business expenses that you should keep in mind when deciding whether or not to start a small business.
The initial costs are likely one of the first expenses you should think about when starting a small business. These initial costs will include securing a location, buying or renting equipment, and any documentation you need in order to start the business. This cost should also include any money you need for inventory or supplies you need to operate the business. You should also think about your initial marketing budget, as you need to tell people about your business to encourage them to come and spend money.
The overhead costs are the expenses associated with running the business. This includes rent for your building, the utilities, and any insurance costs. When starting your business, you should include the first six months of overhead into your calculations of your initial costs. By calculating in this time period, you’ll build in some leeway if it takes a while to get your business operating at a profitable level.
Payroll is one of the largest expense of any small business. In this area, expenses will go up or down at the same rate your business grows or flounders. When you’re just starting out, though, the payroll expense of your small business can refer to how much of the profit you’re not reinvesting into the business. Keeping your payroll expenses low throughout the life of your business will allow you more money to reinvest in the business or to pay for other expenses.
If no one knows about your business, you’re not going to be able to keep money flowing in. Therefore, as a small business owner, you should be dedicating some of your money to financing any marketing expenses. This can be seen more as an investment than an outright expense. After all, if your marketing strategy is successful, you should be getting a large return on the money you put into your marketing expenses.
How expensive bookkeeping will be for your business will largely be determined by your skills and the size of your business. A small business with only a couple of employees will likely be able to get by using accounting software. However, if you’re not familiar with the software, you may have to account for paying for a class on how to use the software on top of paying for the software itself. As your business grows larger, you may need the services of an accountant to properly handle the bookkeeping, which is an added expense.
Figuring out what sort of expenses your business will have will depend largely on what sort of business you intend to run. If you’re running a business out of your home, you may not have any additional overhead costs or payroll expenses. However, that doesn’t mean that you don’t need to keep those expenses in mind. If your business is successful enough, you will want to expand, and having these expenses in mind will help you determine when and how you should go about expanding.