7 Hidden Costs of Running a Small Business You Need to Plan For

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Running a small business comes with many costs, and it’s something we talk about and think about often. When you’re in the early stages, it can be hard to know where to start or what to plan for.

To help, we’ve done some research and pulled together seven of the biggest hidden costs that are often overlooked when starting out, but can have a serious impact over time.

1. Repairs and Replacements

When creating your start-up and ongoing budgets, it’s important to include allowances for repairs and replacements.

Setting aside a regular annual budget for maintenance may feel expensive, but it can save you significantly in the long run. While larger assets and tools are obvious considerations, don’t forget everyday office equipment such as:

Computers and laptops
Copiers and printers
Office furniture

2. Shrinkage

Shrinkage refers to the loss of goods caused by factors such as:

Employee theft
Shoplifting
Administrative errors
Vendor fraud
Damage in transit or in store
Cashier errors that benefit the customer

According to Retail Research UK, retail shrinkage costs UK retailers approximately 1.32% of total sales each year.

3. Employees

The people who help your business run can also have a major impact on its costs.

Salaries, benefits, training and overheads all need to be factored in. Replacing an employee can be far more expensive than many business owners expect.

Reports suggest the average cost of an employee is around 183% of their wage, once you account for:

28 days’ annual holiday
An average of 5 training days
7.2 sick days
38 days of wasted or unproductive time

This is why having a robust workforce or outsourcing solution is so important.

4. Payment Delays

This may seem obvious, but many business owners fall into the trap of thinking, “It won’t happen to me.” Unfortunately, it happens to all of us.

Payment delays can be caused by:

Clients forgetting to pay on time
Customers experiencing cashflow issues
Banks holding large transactions
Bank holidays delaying payments

Meanwhile, your own payments (payroll, insurance, rent and utilities) still go out on time. Having reserves in place can help reduce the pressure when delays occur.

Research by the ABFA shows that SMEs are owed £67 billion in unpaid invoices.

5. Subscriptions

There are countless subscriptions to consider when running a small business, including:

Licences
Memberships
Professional bodies
Software and online tools

These are rarely one-off costs. Make sure you understand which subscriptions are essential, which are optional, and factor them into your ongoing expenses.

6. Productivity

Disorganisation can seriously hinder your ability to grow your business.

From email overload to unnecessary meetings, anything that interferes with productive working time is a cost, not just financially, but potentially to your health as well.

“Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.”
– Paul J. Meyer

7. Time

Finally, there’s you.

Your time is extremely valuable, and spending it on tasks that don’t generate income represents lost profit. This could include:

Doing tasks that could be delegated
Covering roles others could handle
Neglecting rest, friends or family

When you’re the boss, it’s easy to get involved in everything. However, for your business to run efficiently, you need to focus on the tasks that will genuinely help it grow.

Final Thoughts

Good luck if you’re starting a new venture, and keep motivated if you’re already running one. If you’d like support with managing your admin, time or resources more effectively, don’t forget to get in touch… we’re always happy to help!

7 ‘Hidden’ Costs Of Running A Small Business