For many, the idea of starting a business is exciting. The dreams of being your own boss and doing what you love all day long is worth pursuing. As many successful entrepreneurs will agree, making a business plan is the most effective way to starting a successful business.
Understanding the true costs of running your own business should be part of any business plan. Below we list all the costs that you will need to consider when putting together a budget for your business.
Make a List of All Possible Costs
The cost of running your own business is vastly different per industry. Businesses that require a lot of equipment and inventory purchases up front are more likely to spend more than a service based business. Putting together a list of all possible costs is a great way to help organize where you could most effectively spend your money when starting a business.
While there will most likely be a lot of unknown business costs, take the time to research all potential costs. Some possible expenses a new small business may incur include:
Insurance, license and permit fees – almost all businesses will be required to pay for business licenses and permits to run their business. Additionally, your business may be required to undergo health and safety inspections. Check with your specific state to see what type of permits and licenses are required within your industry.
Equipment and supplies – Most businesses require basic equipment to run a business. Even a salesman will need a car or public transportation to visit customers. Try to think of all the equipment and supplies you may need to run your business.
Advertising and promotion – It’s hard to run a business if customers don’t know that you exist! There are hundreds of different avenues that could be used to promote your business. Make sure to understand what type of advertising typically works best in your industry and understand the costs associated with that type of advertising.
Borrowing costs – Getting a business loan or cash advance for your business can help move your business idea forward. Make sure you understand the full cost of the loan or cash advance and what it could mean for your business.
Employee expenses – Often times good employees require more than an hourly wage. You will need to consider benefits and bonuses as well as liability for all your employees.
Technological expenses – This could include computer systems, POS Systems, and credit card processing terminals. You will need to consider all hardware and software expenses that your business will need.
Business Insurance – If you carry inventory or plan to pay for employees, business insurance is a necessary expense that could really help protect your business.
Run it Through and Online Startup Calculator
The internet is an awesome place full of great information. Running all of your expenses through an online startup calculator can give you a clear idea of the actual costs of running a business. They may even include costs that you have not previously considered. Here is our favorite calculator:
Types of Costs
When you have completed your list, categorize everything in your list based on whether you need it to run your small business or just want it to run your business. They can be labeled with the following:
One-time or Ongoing Expenses – Most expenses for a start-up business can be categorized as a one-time fee or an ongoing expense. A one-time expense can be money used one month to buy computers for your business. The ongoing expense would be the cost it takes to maintain the computers. Your budget will most likely consist mostly of ongoing fees for things like product inventory purchases, utility bills and employee paychecks. Those expenses are easy to remember and record because they happen monthly. However, one-time expenses need to be accounted for within your budget. Forgetting about them means that they pop-up unexpectedly and can halt business production until they are paid.
Necessary Costs or Optional Costs. It is important to narrow down which costs are absolutely vital to the growth of your business. Within your list, they need to be separate from optional costs. Optional purchases are simply those purchases that will make running the business easier, but they are not critical to day-to-day operations. Sometimes optional purchases may seem like necessary purchases, when in reality they could be saved for a time that cash is flowing.
Fixed Costs or Variable Costs. A fixed cost is an expense that you can count on to stay the same month after month. These can include equipment rental or lease payments, business store rentals and business vehicle payments. Variable costs are also made consistently each month, but the total amount is never the same. This can be something like utility payments that change each month that you run your business.
Maintain Realistic Expectations
Starting a small business is very exciting and that enthusiasm will carry you through many moments of self-doubt. However, there is a fine line between enthusiasm and unrealistic optimism. Don’t be afraid to talk to others in your industry. Sometimes it is wise to start small in order to test whether your product will sell and how much customers would be willing to pay.
Getting the Cash to Help with Start-Up Costs
All these ideas can really help you to expand your business. However, if you are stuck not promoting your business because you do not have any extra cash on hand, then SecureGlobalPay has a solution for you.
SecureGlobalPay now offers Capital for Merchants which lets you build your business presence through different marketing techniques. As a direct funding source backed by one of the nation’s most trusted credit card processing companies, Capital for Merchants specializes in merchant cash advances that help small businesses grow and succeed.
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