Getting a business off the ground, and running to the point where it’s turning a profit takes money. The old adage ‘it takes money to make money’ is true, there are a huge number of costs in the beginning which can be expensive. Finding an investor, taking on a business partner or using savings and loans to fund this are all ways you can go about it, but what exactly will you be spending the money on? Here are some of the costs to factor in when you’re working out your budget.
Unless you plan on running your business from home, you will need to factor in the cost of premises. And depending on what kind of business you run there could be a lot more to this than just an office. It could be a factory floor or a warehouse, a lab, a shop, showroom, workshop or something else- or any combination of the above. The size and location of your premises will massively influence the space, so unless you absolutely have to be in the center of a city or other hotspot, it could be worth locating somewhere else. It will be a little cheaper, and you’ll get more for your money. However, in the case of certain shops and other companies, your business will depend on being accessible so the city center would be a better choice. But think carefully, do your research and gather prices in different areas so you can work out which would be the most cost effective for your business.
A nice office looks impressive and will keep staff happy. But it can come at a price (link)
The next cost you will need to factor in when it comes to your business is equipment. Whether it’s computers and printers, phones and other office equipment, or machinery, vehicles or other specialist items. These things can all be pricey when you’re getting set up so work out which equipment you need and whether some things are able to wait until further down the line. You could use finance and loans to buy things new, or you could use a hire company to hire things at least in the beginning. Once you’re turning a profit, you could then look into investing in them yourself. You could also scour auctions and second-hand deals to find what you need for a good price. Often when businesses close down or go bankrupt, they sell things for hugely reduced prices. Bad news for them, great news for you. Be sure to keep your eyes peeled you may be able to snag the right items for your business without spending as much as you thought
Getting the right staff for your business can be a logistical nightmare. As well as paying their wages, you also have to factor in the time and cost of advertising, interviewing and training. Some business will be able to get away with using a contract labour hire company, this can make things easier as you have access to people with the right skills any time you need them. For other companies, it might be more difficult, especially if you need to hire people with very specialist skills. Making your company an attractive place to work is key. Along with a good wage, offering additional benefits will mean people are more likely to show interest in working for you and could allow you to snag the best employees. A company car or smartphone, medical, dental and retirement packages, even the occasional free company lunch are nice benefits. But of course, these things all cost money. You will need to find the balance between attracting the right workers and keeping costs under control.
Finding the right workers to run your business can be tricky and expensive (link)
If you’re looking to save money on all of the above- premises, equipment and hiring staff, then outsourcing is a good option. Here you will employ other companies to run certain aspects of yours off site. You could outsource anything from payroll to accounts to fulfillment. This way you don’t have to worry about hiring your own employees and finding a place for them all to work (smaller premises means less money spent). You don’t have to purchase additional equipment for them to use. When you keep different departments in-house, you absolutely have to ensure that things are being done correctly. For example, the finance department makes an error which affects your tax, you could end up in serious trouble. If Human Resources don’t deal with workplace harassment or bullying correctly, it could lead to a lawsuit. When you outsource, it just gives you that added peace of mind that each company is completely professional and at the top of their game. It’s a weight off your shoulders since it’s not being dealt with by you directly, but you know the work is still being done to the best standard. Outsourcing allows you to keep your in-house team small and efficient. While you might be handing over elements of your business to other companies, it actually allows you to keep better control over your business. The legal and practical issues around some parts of business are complicated and best left to professionals in the field.
Insurances and Licenses
One of the less obvious, but incredibly important things you might not have thought about are the insurances and licenses you will need to run your business. Every company needs public liability insurance, that way if someone is injured as a result of your business (whether it’s on the premises or because of your products) you will be covered. A large lawsuit could be enough to completely bankrupt you, especially in the early days when you’re still struggling to make it all work. Licenses are another issue, and are far more in depth than you might realise. You need a license for everything from playing background music in your shop (including the music channels on tv or the radio), sign permits (some places restrict the size, location, lighting and sometimes the type of sign you can use) and if you’re dealing with food you will of course need a food safety permit. There are hundreds of different ones out there, and the average business will need to apply for many of them. It’s usually a case of filling out a lot of paperwork and paying a fee, but something to factor in when you’re budgeting for your business. If you don’t have the right licenses in place you put yourself at risk for serious fines and penalties, so don’t take the chance.
Marketing and Advertising
Its really not a case of ‘build it and they will come’ in business- and having that mentality is simply setting yourself up for failure. You might have the best idea, service, product or anything else in the world. But without the right advertising and the right marketing techniques, your potential customers are never going to hear about it. You need to be investing in the marketing and advertising aspects of your business if you really want to succeed and get the word out there. While paper methods aren’t the most effective these days, they’re not totally obsolete and so leaflets and business cards are two areas you will need to spend- in both print and design. These can be posted, left in relevant businesses and shops and business cards are useful for networking. You will need a social media expert who can help to influence your audience, and both promote and push products to customers as well as get the word out to new ones. Google AdWords, working with bloggers and affiliate schemes are other ways you can promote your business. But all require money so set a budget for these types of things and go from there. If people don’t know about your company, they can’t buy from you, and you can’t make a profit. So be sure not to overlook this area
Social media is a great way to promote business. Do you know how to go about this? (link)
If you’re a new business, paying for business advice is a worthy investment. Let’s face it, there’s a lot at stake. You’ve probably poured your life savings into this, or at the very least taken out loans that could cripple you if things go wrong. If you don’t have the experience to know where you could be going wrong then spending that extra on professional guidance could be the difference between success and failure. You might be lucky enough to secure an investor who will also double up as a mentor. If not, find an experienced business coach.
The key to success in business is to have your figures right. You need to know how much cash you’re working with, and exactly how much you need to spend to get everything running and off the ground. Underestimate these costs, and you could go broke before you’ve even really got going.Published in