By Eric Gordon
Launching a new business may be a top goal, but you do not want to rush into the process blindly. Many entrepreneurs spend ample time preparing a budget and reviewing their finances before starting a new endeavor. However, there may be some expenses associated with a startup that you may be overlooking.
This could place your business in financial jeopardy and prevent you from being able to reinvest funds that are necessary to grow your business. By learning more about some of the more frequently overlooked startup expenses that you may face in your first year of operation, you can fine-tune your budget and launch your business on sound financial footing.
1. Permits and Licenses
Before you open your doors, it is critical that you learn more about the various permits and licenses that are required by your state or municipality. These requirements may vary by your location as well as by your industry.
Furthermore, licenses may need to be renewed regularly over the years, and this means that you need to include this expense in your ongoing business expenses.
It may be wise to network with your industry peers through the chamber of commerce or local industry organizations to learn more about the requirements as well as to potentially discover ways to save money on these expenses.
2. Administrative Costs
Many entrepreneurs will plan for the cost of an office space rental or purchase as well as related utilities. However, you may not plan on things that are needed to run the office, such as furniture and filing cabinets, toilet paper, pens, paper, and more.
In addition, you also need to buy technological equipment as well as pay to maintain it, and this can include computers, printers, scanners, and other similar items. You may even need to pay for ongoing website maintenance, IT consulting services, and more.
Even seemingly small expenses, such as postage and paper clips, can add up over the months and should be properly budgeted for. When you are preparing your budget for these products and services, consider looking for ways to save on these expenses.
3. Business Insurance
You may already be budgeting for some types of insurance for your business, such as commercial auto insurance for your vehicles or a rental policy for your office space. However, you should also consider buying a liability insurance policy. This policy can provide financial benefits in the event your business is sued because of faulty products, negligence and other related issues.
You may also need to invest in unemployment insurance, workers’ compensation insurance and other coverage depending on the type of business that you are starting and whether or not you will have employees.
Spend time thoroughly reviewing the coverage options so that you take full advantage of the benefits of insurance. Remember to shop for new coverage periodically every six to 12 months to ensure that you always have the best rates available.
Taxes for your small business can be significant, but they are often overlooked during the planning stages. You may have plans to reinvest your profits for the first few years to help your business grow, but any profits may be taxable regardless of whether or not the money is reinvested into the company.
You may also need to pay personal income tax, a self-employment tax and property taxes. In addition, there may be taxes associated with your employees, such as Medicare, Social Security or FICA, unemployment tax, and more. Take advantage of all deductions and credits that may be available to you to keep this expense as low as possible.
5. Legal and Accounting Fees
Some entrepreneurs also overlook legal and accounting fees. You may need professional legal assistance setting up your business entity, preparing or reviewing contracts, and more. You may also need ongoing accounting assistance so that you can focus your attention on running your business.
These professional services can be expensive in some cases, so you need to properly budget for them. Explore the difference in cost for hiring in-house support, putting a professional on retainer or paying for the services on an as-needed basis.
Remember that these are only a few of the expenses that your small business will incur. You may also have to pay credit card fees and cell phone service fees. Sales and marketing expenses may also consume a healthy portion of your budget.
If you are preparing a budget for your startup project, ensure that it includes all of these expenses that may be applicable to your situation. By properly preparing your finances for your launch, you can ensure that your business is established on solid footing. This could potentially help you to find more funds to reinvest in your business during the first few crucial months and years.
Eric Gordon is an independent business development and marketing specialist for SMEs. He loves sharing his insights and experience to assist business owners in growing their revenues. You can find Eric on Twitter @ericdavidgordon.