If you’re thinking about starting a business, then one of your big concerns will revolve around money. How much does it cost to run a business? Well, it’s impossible to come up with a figure here, as every business is different. However, we can show you some of the biggest outgoings your business will face, to help you understand how much needs paying for:
Of course, a huge part of your outgoings could be spent on your employees. Especially if you have full-time staff that are contracted to work for you. Add up the wages of any full-time employees you intend to bring to your business. Here’s one tip; try and keep this to the bare minimum. The reason for this is because contracted full-time staff have to have employee benefits too. So, this is another extra cost to consider.
If you outsource a lot of jobs, then life is considerably easier. All you have to do is pay another company for their services. Or, hiring freelance workers to work from home means you don’t have to deal with things like sick pay, or any other employee benefits. Sick pay or absence pay is probably the most frustrating expense for an employer. In essence, you’re paying your employees for not doing any work. They go away on holiday and still get paid for it until they use up all their holiday days.
Now, a big portion of your budget should be focused on your IT services. Every business will need to choose from a range of IT service providers to set a lot of things up. Primarily, you want a business network setup. This is a network that only people in your company can access, and it’s where a lot of data gets stored. Sometimes, this network can be created in the form of a small data center in your office somewhere. However, a preferred method for a lot of small businesses is to move their IT services to the cloud. There will be initial costs for setting everything up, and you might want to consider hiring some maintenance guys to help too. Outsource IT maintenance and security services, and your network will remain safe and secure for the foreseeable future.
Along with this, you also need to think about your broadband provider. Every business needs an internet connection, and fiber broadband is the best bet right now. Trawl through the various broadband providers and look at their business deals. Compare the prices until you find one that’s affordable and offers a great service.
A reasonable chunk of your budget will be set aside for marketing your business. This is a very important outgoing, as it can directly influence your income. Market your business effectively, and you will see an increase in sales, more customers, and a higher profit margin. But, you also have to realize that to market your business effectively, you’re going to have to spend a fair amount of money. There are two ways you can go about marketing a company, firstly, you could try and do it yourself with no outside help. This means researching everything and paying for certain ideas and campaigns to drive your business forward.
Alternatively, you can enlist the help of a marketing agency or a freelance marketer. You’ll pay them to do all the research and come up with the dream plan for you. Of course, you’ll still have to pay for everything they do too. If they want to run an advertising campaign, the money comes out of your pocket. The benefit of this option is that the agency should know what they’re doing. Therefore, every penny you spend will bring in a good return. Do things alone, and you’re relying on your own instinct, which may or may not be better than a team of marketing experts. There’s a risk that some of the things you pay for won’t bring in a good return.
Of course, every business will have purchasing costs of some sort regarding their business supplies. There are plenty of things that a company needs to buy to help keep it ticking over. Even someone with a home business has additional purchasing costs to consider. Perhaps you have printer paper that you need to buy? Or, supplies for your home office like pencils, pens, etc. All of these things come under your purchasing costs – which can sometimes be referred to as procurement costs.
There are two main types of purchase you will make. The first is mentioned above, and it’s to do with all your supplies, etc. Anything you buy that doesn’t have a direct impact on the product/service you sell is an indirect purchase. Then, you have everything you buy that does directly impact what you sell – a direct purchase. For example, a company that makes computers will need to buy things like circuit boards and other electrical components, these are direct purchases. You have the raw materials that you need to buy, and then the extra things that contribute to your business but aren’t technically essential.
Finally, you have the costs of your premises to think about too. This can be an office, retail unit, warehouse; you name it! Either way, it will be a big cost for your business. You can either rent your premises or buy it. Renting means you have to handle money leaving your business every month. Buying means you have to pay a huge amount upfront. It’s a catch 22, some people prefer one way to the other.
Alternatively, reduce premises costs completely by working from home. A lot of small businesses can save money by doing this and having their staff work remotely too. It’ll save money, in the startup phase, meaning you’ll have more than enough saved up to upgrade to proper premises in the future, and handle its costs better.
If you understand how many outgoings your business has, and can tally up the costs of each one, then it becomes easier to work out a budget for your business. You’ll basically see how much it costs to run your company, and can work on boosting revenue to make the income outweigh the outgoings.