7 ‘Hidden’ Costs Of Running A Small Business
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It’s a subject we often talk and think about as there are so many costs involved with running a business, and when you’re in the early stages it can be hard to know where to start. So we’ve done a bit of research and pulled together some of the biggest ones to think about – that are often overlooked when starting out.
1.Repairs and Replacements
It’s important to include a number of considerations in your start up and ongoing budgets. Including a regular annual budget for repairs and maintenance may feel costly, but ultimately it could save you much more! Larger assets and tools are pretty obvious here, but also consider factoring in office equipment such as computers/laptops, copiers and furniture.
This is the loss of goods that can be attributed to things such as employee theft, shoplifting, administrative errors, vendor fraud, damage in transit or in store, and cashier errors that benefit the customer.
According to Retail Research UK retail shrinkage costs UK retailers approx. 1.32% of their total sales each year.
The closest people that help your business run can also significantly impact it’s potential. Salaries, benefits, training and overhead costs all factor here. It’s important to ensure you have a robust workforce or outsourcing solution in place, as replacing one member of staff with another can be surprisingly costly. Reports suggest that the average cost of an employee is c183% of their wage – Plus: 28 days’ holiday per year; An average of 5 training days; 7.2 sick days; and 38 days of wasted / unproductive time
This may seem like an obvious one too, but so many fall into the trap of thinking ‘it won’t happen to me’ – it happens to all of us! Customers or clients may forget to pay on time or have cashflow issues of their own. Banks hold certain transactions above certain amounts, and bank holidays cause payments to come in later than expected. Your payments however, always seem to go out on time! And so, the pressure can mount; Your payroll, insurances, rent and utilities must be paid. It’s wise to have reserves in place to cover this inevitability.
Research by the ABFA shows that SMEs are owed £67bn in unpaid invoices.
There are so many different organisations, licenses, memberships and much more to consider when setting up and running your small business, and they’re rarely one time only expenses. Make sure you consider which ones you will want to be part of and which ones are required and be sure to factor them into your ongoing costs.
Being disorganised can hinder your ability to get where you want to be. From email overload to avoidable meetings, anything that interferes with yours or your teams productive working time is a cost to your business (and can even be bad for your health).
“Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.” – Paul J. Meyer
And finally, there’s you! Your time is extremely valuable and spending it on things that don’t earn you income represents lost profits. Not only could you be wasting time and money doing other people’s jobs (instead of delegating), you might even be neglecting yourself, your friends and even your family. When you’re the boss it’s easy to insist on getting involved in every aspect of your business, but for your business to really work efficiently you really need to focus on the tasks that will help grow the business.
Good luck if you have a new venture, keep motivated if you’re in a current one, and don’t forget to get in touch if we can do anything to support you!