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I know as well as anyone how impactful the success of a small business can have on your personal finances. Now when I say business, I don’t mean a huge conglomerate that turns over billions each year. I must admit that would be nice, but it is not realistic. What I am talking about are the little independent businesses that one may run from home or local coffee shop, that supplements a primary income source.
It is important to not only understand the hidden costs of running a small business, but to also make sure that you are budgeting for these unexpected expenses. Regardless of your circumstances, these expenditures will affect your business at some stage, so be sure to be prepared.
License Fees
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When you first start off you may not realize that you actually need a business license to run a home business. No matter how big or small, it turns out that virtually any company that trades, meaning they buy or sell goods, needs a license to permit these transaction. Licenses vary depending on the state as well as the type of business you are conducting so be sure do your research and file accordingly to avoid facing potentially serious fines.
Industry Association Fees
You don’t legally need to join an industry association; however, they can be an important tool which contributing to the success of your business. Being able to network with other businesses in your industry is essential. Most associations or groups have membership fees join and monthly or yearly dues, but the connections made will likely be invaluable. They are a great way to develop relationships that might be able to grow your business in the future.
Employees
When you start your small business you are essentially a company with a headcount of 1. But as you expand and grow, you will need to hire employees to handle the added work load. You can’t look at the simple salary cost when hiring a new employee. There are other costs you need to take into account that can really start to add up. The hidden cost of employees comes in the form of expenses, payroll taxes, health care, worker’s comp and unemployment. You won’t have to deal with all of these cost at once, but as your business continues to grow, your payroll costs will become a huge expense.
Workplace Safety
If you have employees, then you are required to provide a safe working environment. Depending on your type of business there may different requirements that you are legally obligated to fulfill. It is important to invest in a level 2 first aid course and health & safety training just in case. If you are unsure if your business complies with safety requirements, you can request a free onsite consultation from a government employee to ensure you are up to code.
Overhead
It is hard to imagine the small business you run from home having much overhead expense but they totally do. Just because you are doing everything from your laptop doesn’t mean there aren’t extra expenses. For starters, you have added electrical cost, phone charges and you may need to upgrade your internet to a business speed. Even though we live in a digital age, there are also costs for printing, copying and postage to consider as well. This may not sound like much, but it all can add up to a significant amount.