One of the fundamental tasks when running a business is keeping costs to a minimum. If you let business costs get out of hand, they could eat into your profits and cause the business to go under. That’s why it’s imperative to have an understanding of the major business costs.
Accounting
Some small business owners complete all of their accounting themselves. However, this can take up a huge amount of time, so it’s better to outsource it. You can find excellent small business payroll and accounting services that will take care of the paperwork for you. Of course, that leaves you to focus on actually running the business.
Wages and benefits
Before you run your own business, you could be forgiven for thinking that a wage covers the total costs of an employee. But really, that’s just where it starts. On top of the initial wage, you need to pay for the employee’s benefits (like healthcare and holidays). Plus, you need to provide them with equipment, training, and more. Thus, wages and benefits are one of the highest costs of running a business.
Rent (or mortgage)
Most businesses need a physical space, whether it’s an office or a store. That means you will either have to pay rent or a mortgage. When you are starting a new business, it’s wise to keep the costs of your premises to a minimum. You don’t need a fancy office block when you’re starting out. If you have a large cash reserve, you could put a deposit on a property and pay a mortgage. This will likely be cheaper than rent and provide your business with an asset.
Equipment
Every business needs equipment. Some businesses only require office equipment, like laptops, printers, etc. Other businesses – like those in the healthcare and construction industries – need more specialist equipment. The type of equipment you need will affect how much it costs to buy initially. Then, you need to consider regular maintenance and repair costs.
Utilities
You might not be living at your business premises, but you still need to pay for utilities. That means water, gas, and electricity. This might come included in the cost of your rent, but it’s important to find out. Otherwise, you could be left with an unexpected bill.
Marketing and advertising
Marketing and advertising are essential to the running of a business. This is how you are going to find new customers and sell your products or services to existing customers. Most new businesses spend a large chunk of their budget on marketing and advertising. This is because it’s important to build reputation and brand awareness.
Dining and entertainment
One of the perks of running your own business is that you can factor in dining and entertainment costs. If you need to impress a potential client, you can take them out on the company’s money. This expense is tax-deductible as well. However, it’s important to make a budget if dining and entertainment are going to play a big part in bringing in new customers. It’s too easy to get carried away.
