6 Business Costs That Are Essential

When you’re starting a business, the excitement is often offset by the realization of all the expenses you’re going to have to pay. Some costs can be negotiated. Some expenses can be put off or avoided if you plan right. However, some costs are necessary to doing business, though some business owners may not realize they’re critical or think they don’t have to pay for these things. Here are 6 business costs that are essential.

Insurance

Insurance is something you need to have in place the moment you’re in business. A single lawsuit or catastrophe could throw you into bankruptcy or shut down your business if you don’t have the right coverage in place before you’ve hired your first employee or served for your first customer.

Every business needs general liability insurance to cover claims from bodily injury, personal injury or any other type of damages to clients or third parties. If you want to know exactly what you’ll be covered for, you can shop for general liability at next-insurance.com. If you provide professional services to your clients, you need professional liability insurance such as an errors and omissions insurance policy.

Property insurance is necessary whether you own or lease your space. This insurance covers equipment, inventory, signage and furniture losses in the event of theft, fire, or vandalism for instance. However, it doesn’t necessarily cover you in the case of large disasters like floods and earthquakes. Worker’s compensation needs to be in place when you hire your first employee. Product liability insurance is critical if you’re manufacturing products and selling them to the public. Company vehicles should be covered under the company’s auto insurance policy.

Legal Costs

At the very start, you should consider paying for legal advice when choosing your business’s structure. How you structure the business affects your taxes and how you’d fill out paperwork, such as when you apply for a loan. Always consult with a legal expert when dealing with intellectual property or drafting contracts.

Facilities

You’re going to need to pay for office space, retail space, or other work space unless you’re running a business out of your home. However, you aren’t just going to pay the rent. You will probably need to pay for regular expenses like utilities. You may have to pay for renovations, furniture, phone lines, computers and office supplies.

Depending on your business, you may need to rent or buy equipment. For example, if you’re starting a restaurant, you’ll need everything from stoves and dishwashers to cooking utensils. If you’re opening a beauty salon, you’ll need styling chairs at a minimum. And that’s aside from any supplies you require. If you’re starting a manufacturing business, research your options. You don’t want to buy poor quality equipment because it is cheaper and then have to deal with unexpected breakdowns regularly.

Supplies

If you’re opening a retail store, you need inventory to fill the shelves. For these businesses, inventory costs are routinely 15% to 25% of your budget. Don’t skimp on inventory, because you can’t afford to turn away a new customer because you’re out of stock.

If you’re running a restaurant, restaurant supplies include food, condiments, and disposable items like napkins. If you ship items from a warehouse or products that you manufacture, shipping supplies will be a line item in your budget.

IT

In this day and age, you must have a website. Your cost for hosting a website may be relatively low, but it is probably worth it to pay a professional to design a good website. This could come out of your marketing budget, but you’ll need to pay for marketing the business even after you have a website up and running.

Payroll

Unless you’re truly a one-person operation, you have to figure out how to afford payroll. At the very start, you may be able to hire 1099 contractors for specific tasks before hiring people as formal employees. Note that you aren’t just paying them an hourly wage; you’ll have to pay for benefits, commissions, and overtime where appropriate. And don’t forget to pay yourself a salary. Altogether, payroll costs range from 25% to 50% of the average startup’s budget.

Take the time to budget for an experienced bookkeeper or CPA. A CPA can help you select a benefits program for your employees and ensure that you’re complying with various government regulations. Note that you don’t have to hire the bookkeeper or CPA full time, but you will want to budget the couple thousand dollars a year it costs for them to add you to their client roster. Then there’s the fact that the professional can ensure that you’re doing your taxes correctly and on time.

The costs of starting a new business can add up. However, you cannot afford to skimp in these six categories. These business costs are essential.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.