It is essential that anyone starting their own business spends plenty of time and effort planning and reviewing their finances to ensure it will be profitable.
This will be the main way a company is judged, as every business aims to make as much money as possible.
There are many costs involved in launching a start-up, from overheads to admin, but research has found that on average, UK businesses underestimate all the expenses of its first year by £2,525.
This is mainly accumulated from various unexpected costs cropping up. Avoid such problems by financially preparing for the following expenses.
All businesses must include overheads in their initial budgets, including computers, printers, phones, internet connection and any other technological equipment and software.
Some technology expenses that are often not factored into a start-up’s budget is that of the company’s website and other information systems.
Owning and running a website is fairly cheap, but you will need to pay for the domain and hosting. Plus, most businesses will use accounting and payroll software are used by many companies to keep on top of their finances, but purchasing and subscribing to such services can soon add up. Alternatively, this could be outsourced to avoid investing in the software, though it will still cost money.
Insurance, Licensing and Industry Fees
Depending on the type of business you are setting up you may need a specific licence or permit to run the company, sell certain products in areas and for other business activities.
It is vital you check this, as licences cost money. It can also be worth joining a trade association within your industry to be connected and protected, which also costs.
Insurance is something else many business owners forget about until later, though it is essential. It can actually protect you from unexpected costs and as an employer you will be legally obliged to have employers’ liability insurance and commercial motor insurance (if your business uses vehicles).
Legal challenges can come from all areas, customers, clients, employees, rivals and more. They can also appear out of the blue, and dealing with any legal matters will cost your firm money, otherwise you may suffer reputational damage if you are unable to defend your business in court.
Putting aside some money in case you face any such legal challenge is a smart move, along with factoring it into a budget. Using legal experts for litigation and arbitration is a common reason many start-ups require expert help. Add these costs to your budget and your finances and reputation should remain intact.
Advertising, Promotion and Marketing
In order for a start-up to be successful and grow it needs to attract new business. The main way this will be done in the first place is through a good advertising and marketing campaign, making the target market aware of your company.
While there are many ways this can be done cheaply and even for free, it is worth spending enough on materials, a strategy and more. Many businesses will outsource physical and digital marketing, so the amount you pay a team of experts will need to be included in your budget.
Travel and Employee Expenses
Along with employee costs such as wages and benefits, there will be other expenses that your company will have to pay out and budget for.
This could be everything from travel costs to visit clients and potential investors, to funds for entertaining clients and putting on lunches. In the early stages these may not add up to much, but over the years they are bound to become more expensive.
Consider all of these unexpected costs when setting up and running a new business to ensure your start-up is financially secure and successful.