Whether you run a sandwich shop or a four-generation law practice, there’s at least one common experience every business owner encounters: expenses.
Business expenses are the daily costs of operating your company, from conventional utilities such as electricity and water to employee wages to federal and local taxes. They are a part of your income statement and deducted from revenue to determine your net income.
In this article, luminablog.co.uk reviews some of the most common expenses and how to stay on top of your costs so you can run your organization.
Essential to the startup effort is creating a business plan—a detailed map of the new business. A business plan forces consideration of the different startup costs. Underestimating expenses falsely increases expected net profit, a situation that does not bode well for any small business owner.
Starting up any kind of business requires an infusion of capital. There are two ways to acquire capital for a business: equity financing and debt financing. Usually, equity financing entails the issuance of stock, but this does not apply to most small businesses, which are proprietorships.
For small business owners, the most likely source of financing is debt in the form of a small business loan. Business owners can often get loans from banks, savings institutions, and the U.S. Small Business Administration (SBA). If you’re getting a loan in the UK, you can go through this list of UK loan companies to find what suits your business.
Like any other loan, business loans are accompanied by interest payments. These payments must be planned for when starting a business, as the cost of default is very high.
Careful research of the industry and consumer makeup must be conducted before starting a business. Some business owners choose to hire market research firms to aid them in the assessment process.
For business owners who choose to follow this route, the expense of hiring these experts must be included in the business plan.
Many businesses are expected to submit to health inspections and authorizations to obtain certain business licenses and permits. Some businesses might require basic licenses while others need industry-specific permits.
Carrying insurance to cover your employees, customers, business assets, and yourself can help protect your personal assets from any liabilities that may arise.
Technological expenses include the cost of a website, information systems, and software, including accounting and payroll software, for a business. Some small business owners choose to outsource these functions to other companies to save on payroll and benefits.
Every business requires some form of equipment and basic supplies. Before adding equipment expenses to the list of startup costs, a decision has to be made to lease or buy.
The state of your finances will play a major part in this decision. Even if you have enough money to buy equipment, unavoidable expenses may make leasing, with the intention to buy at a later date, a viable option. However, it is important to remember that, regardless of the cash position, a lease may not always be best, depending upon the type of equipment and terms of the lease.
A new company or startup business is unlikely to succeed without promoting itself. However, promoting a business entails much more than placing ads in a local newspaper.
It also includes marketing—everything a company does to attract clients to the business. Marketing has become such a science that any advantage is beneficial, so external dedicated marketing companies are most often hired.
Businesses planning to hire employees must plan for wages, salaries, and benefits, also known as the cost of labor.
Failure to compensate employees adequately can end in low morale, mutiny, and bad publicity, all of which can be disastrous to a company.