6 Expenses To Consider When Opening a Business
Are you thinking of starting up a new business? Fantastic!
Whether it’s a dental practice, finally turning your hobby into a side business or another type of business, there are some expenses that we don’t necessarily think about. In all our excitement to launch, start marketing, hire staff, secure financing, and set up our websites, it’s easy to miss or misjudge a few important startup costs. Yet, neglecting these often-overlooked expenses could result in a cash crunch before our business even gets off the ground.
Here are six sneaky small business startup costs:
1. Business Insurance
While you hope nothing goes wrong when you’re launching a new business venture, the reality is sometimes it does. Not having business insurance in place could leave you struggling to pay for expenses you didn’t budget for while trying to finance a new business.
Every small business is different, so do your research and choose the insurance coverages best suited for your situation. Here are a few:
Business property insurance- this helps to protect your workplace location and property like tools and equipment, while
General liability insurance - this helps protect your new business from claims for bodily injury, property damage, and other personal claims.
Business income insurance - this helps protect income lost when you can’t operate due to covered losses such as theft or fire.
Life insurance and disability insurance - this is a no-brainer, it protects your family against income loss.
2. Fees and Licenses
Among other often-overlooked startup costs are the fees associated with establishing a business. You may have to pay to search and register your business name and even have it trademarked. Depending on your business location and the nature of the business, you may need federal, state, and/or municipal licenses and permits. If you’re a dental professional you will need to pay for the renewal of your license to practice dentistry, your licenses to prescribe controlled substances and professional dues almost on a yearly basis. The costs and requirements will vary.
3. Professional Expertise
Don’t underestimate legal fees and accounting fees when estimating the costs to start a new business. Paying for good advice regarding your business structure, legal agreements, and financial issues early on in your business can help you minimize or avoid costly future legal or tax entanglements. Get a few quotes so you’ll have a realistic idea of the costs you’ll incur.
4. Taxes
There’s no getting away from paying taxes. Find out what municipal, state, and federal taxes your startup must pay and when. State and municipal taxes vary, so visit the U.S. Small Business Administration website or ask your trusted CPA or tax lawyer about the details pertinent to your location. At the very minimum, expect to pay state income tax and state employment taxes if you have staff, plus your federal business taxes, depending on your corporate/business structure.
5. Payroll/Bookkeeping/accounting Fees
Whether you have an automated online system, a bookkeeper who visits your office, a virtual assistant, or a trusted CPA don’t forget to account for this important monthly cost. While a bookkeeper may charge a small fee per hour, a monthly flat-fee arrangement may be better, or you may opt for a subscription to an automated online payroll and bookkeeping program, such as Quickbooks or Gusto.
6. Utility Bills
While you probably studied the commercial rents or property values in your area pretty carefully when budgeting for your startup costs, an area often overlooked are monthly utility expenses. Your startup operating expenses include more than just your office rent, lease payment, or mortgage. Depending on your business and location, your startup utility bills could also include:
Electricity
Heat and/or air conditioning
Telephone
Internet
Water
Condo fees
Talk to other business owners in the area to get an idea of the typical costs based on the square footage you’re considering.
Starting a new business is always a risk, but you can minimize your risk of failure and maximize your potential for success by realistically budgeting for all types of startup costs. This way you’ll be better prepared financially to handle the unexpected expenses that are bound to pop up.
