Top 5 Essential Costs to Expect When Starting a Business
It’s important to know what expenses you’re in for when starting a business. These necessary expenses are called essential costs. Essential costs are also known as “overhead costs”.
Overhead costs are expenses that business owners pay, which have little or nothing to do with the direct production of their goods or services. Business owners pay overhead costs in order to run their business.
They include rent, insurance and workers compensation insurance, corporate income taxes and sales taxes, licenses and other fees, as well as tools, equipment and vehicles needed for the business.
The five essential costs below are mandatory and will be needed right away. However, it’s also important to remember that additional expenses will pop up as your venture progresses; don’t forget to account for any additional spending in setting your budget and planning your cash flow.
Cost of Business Plan
Business plans comprise one of the most important components in the success of a new business venture. A business plan is a foundation for every great business idea. It is the foundational blueprint you create outlining all aspects of your business structure, operation, and future growth. It’s like a tiny startup company within your larger startup company.
Your vision, mission and values set the tone for your business plan… and ultimately everything about your business – its direction, customer experience, pricing, profitability, sustainability, cash flow, marketing strategy and sales tactics.
Your business plan will require a significant investment in time, as well as in money, to get the information, resources, and potentially even the help you need. But rest assured that it’s an expense that’s more than worth it.
Cost of Business Permits, Licenses, and Insurance
These costs vary depending on the location of the business and the industry in which it operates. Costs may also vary depending on the owner’s personal tax situation and the type of entity chosen by the business for legal and tax purposes.
While new businesses can operate on a shoestring budget, they are often required to get business insurance, business licenses, and business permits in order to be compliant with local, state, and federal governments. It is crucial to understand the costs of starting a business before you dive in headfirst.
Cost of Equipment
When you’re starting a business and launching a product, you’ll need some basic equipment to get things set up. Equipment is the highest cost of a startup. It’s also going to be a larger part of your budget than for a conventional business.
The cost of startup equipment will vary widely across industries. After all, what equipment you need is going to vary depending on what business you are pursuing and what you need to get started.
Cost of Accounting and Legal Expertise
Every business needs to be set up as a separate legal entity, and all have ongoing accounting needs. The best way to solve a problem is to avoid it. Hire an accountant to handle your taxes and an attorney to give you peace of mind.
Accounting and legal expertise combined can cost you thousands of dollars. Know that this expense is crucial, though—if your business is going to take off, you’ll have to be prepared with the paperwork.
Cost of a Website
A website is your first step to getting your business off the ground. It’s the online storefront that will market and sell your products. It’s a place for people to come when they’re looking for what you’re offering, whether it’s a specific item or a more general brand.
Most new businesses spend quite a lot on their websites to ensure that it is flawless from the word go, and this expense can really pay off.