In our most recent article, we detailed six common costs associated with starting up a small business that most people just don’t expect. Permits and fees can add quite a bit to start-up costs, as can taxes and lawyers. Insurance adds another big cost to support a business, and shrinkage — losing inventory and money due to factors including shoplifting and employee theft — can plague a company throughout its existence. Of course, there are also the fees associated with credit card processing for small businesses that can take a big chunk out of profits over the long term. (That one we can help with.)
As it turns out, those aren’t the only problems that can surprise a small business owner when a new business is starting up. Here are four more hidden costs associated with starting up a business.
Unexpected Loan Problems
When many small business owners are making a budget for the cost of starting their business, they will often make a list of what they’ll need to make it work. For instance, a restaurant will need the location, the right cooking equipment, tables, chairs, staff, and everything else you’d see in an eating establishment. They’ll then come up with a monetary amount that will cover those costs.
But what about the cost of the loan itself? Unfortunately, some business owners forget to budget the cost of the loan that’s going to purchase everything we just listed. Loans come with interest rates, and these interest rates will most likely be based on the credit history of the small business owner themselves. Bad credit in your personal life will translate to bad credit in the business world, which will lead to refused loans (at worst) and high-interest rates (at best). Before you apply for a loan, you might want to try fixing your credit as much as possible.
Journey Business Solutions might be able to help with our working capital program. Click here to learn more.
All The Little Extras
As we just mentioned, there is a long list of equipment a restaurant will need before it opens. But there is another list, just as long, that will add up quickly and can surprise many business owners. And it’s not just restaurants that have these hidden costs; they’ll affect just about any business.
Think of the cost of cleaning a small business. It will need a vacuum, brooms, and window cleaner. Bathrooms will also have to be cleaned, which means buying a mop and disinfectant. Bathrooms also have to be stocked with paper towels and toilet paper.
Of course, office equipment is something that too many entrepreneurs forget about. Some sort of computer will be necessary for budgeting and scheduling. Printers, toner, and printer paper are a must. Even the smallest costs, such as pens and thumbtacks, can add up. Most businesses also have a hardline phone.
Of course, you can’t forget the utilities that you’ll most likely be paying for. There’s the phone service we just discussed, as well as water, heating, and electricity bills that will come due every month. Businesses will also need a strong internet connection, for themselves and for the customers. By far the most important reason for the internet connection is to handle payment processing, because few customers carry enough cash on them if your internet goes down.
If all of these things seem trivial, realize that the initial outlay of everything here could cost thousands of dollars. After that, the cost of disposable items like paper products will be an ongoing cost.
Employee Benefits
We truly hope that you’re the type of employer who plans on giving their employees some perks as they work for you. While offering healthcare or retirement benefits might be difficult at first, you might be able to offer vacation time or bonuses when business is good. Keeping good employees can be difficult so you might have to budget for raises as well.
There are also benefits that you might not be able to skip, such as worker’s compensation. Don’t forget about taxes associated with having employees. Remember, the average cost of having an employee can be 1.25 to 1.4 times their base pay.
Networking Costs
Thanks to LinkedIn, networking has become easier than it once was. But that doesn’t mean that joining LinkedIn means you’re done with networking. A lot of it still has to happen using tried-and-true in-person methods, and that could incur some added costs.
Networking costs can include a wide range of activities and organizations. This might include joining a chamber of commerce or other social clubs, maybe even a membership to a gym or a golf course. Networking can be very important to the survival of many businesses, so don’t underestimate what it’s going to cost to keep up with people in town who can help your business grow.
The Pay You Lose
When you start your own small business that requires merchant services, you’ll probably be throwing yourself into it wholeheartedly. It’s your business, and you want to make the most of it.
The problem is that you’re not making money in any other way. To start your business, you have to quit your current job. That means you’re no longer making guaranteed money like you used to. Hopefully your business will take off quickly, but if it doesn’t then you certainly have to consider the money lost from your old job as a hidden cost.
We Can Help
We don’t want to talk you out of starting your own company, but we do want to make sure you’re ready for some of the hidden challenges that come with opening your own business. We hope that these four points, along with the six we mentioned in the previous blog, have helped prepare you in some small way.
While we can’t address every problem you might have as a business owner, we can help you with lowering your payment processing fees and maybe even help you with working capital. Contact our RGV, Houston, San Antonio, Beaumont, or Dallas/Fort Worth offices to learn more!