Business Costs You Didn’t Realize Are Actually Common!
When looking to start a business, some of your costs will be obvious to you.
Every company should put together a business plan, and the expenses in the plan will likely include business income taxes, payroll taxes, overhead costs, and business licenses and permits. As an owner, you can expect these costs and include them in your financial projections.
But what about the costs that are hidden in the shadows?
Oh yes, they exist and they are not an urban legend. In fact, these expenses are far more common than the uninitiated can imagine.
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Here are four less-obvious costs to consider before opening the company doors and starting your business.
Vehicle Lawsuits
Most entrepreneurs understand how rivals use lawsuits to maintain their market position. For example, a competitor may file a lawsuit alleging the theft of intellectual property, such as violating a patent or trademark.
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Your company will have legal exposure if an employee or guest sues, due to an accident in the workplace. Unfair dismissal is also getting more and more common.
Vehicle lawsuits, however, don’t get as much attention as the others- even though they are fairly common. Company car and semi-truck crash statistics prove this pretty emphatically. Businesses that use vehicles to operate have exposure to vehicle lawsuits.
Insurance Fees
In the beginning, the company doesn’t have much so there isn’t a lot to insure. A couple of desks and computers here and there will warrant a content policy but that’s about all.
As time goes on, the business will expand and so will the number and value of assets. Therefore, you need to plan to cover them in case there is an unforeseen circumstance.
Cyber insurance is without a doubt the best example. Servers are enormous and take time to install and operate, and insuring company servers against fire, theft, or hacking, is a must. Be aware of compensation and liability policies, too.
What Is Shrinkage?
Did you know that businesses in the U.S. lose an estimated $45bn as a result of shrinkage? Shrinkage refers to losses due to employee theft, and every business has exposure to shrinkage losses to some extent. Retailers- particularly retailers that process a large number of sales transactions- are at a high risk for shrinkage.
Something as minor as employee theft is one of the many causes of the $45bn deficit. Understanding that theft is important is the only way to cut down the total dollar amount of shrinkage.
How Do You Reward Employees?
Employees in a startup firm may earn a competitive wage, but on other company benefits. Keeping labor costs low allows a new business to get off of the ground.
As it begins to flourish, however, your staff may be courted by other companies- some that offer an attractive benefits package. Because they offer more money and better benefits, your employees will pay attention to other offers.
The only way to fight back is to include benefits, such as healthcare and dental insurance, to workers on your staff. Otherwise, you will lose the best workers and won’t attract any credible replacements.
A Cost of Doing Business
How will your budget look once you add these costs to other that you plan for? You may generate a smaller profit in the short term, but your company will be more competitive and profitable in the long term.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
(you tube channel) kenboydstl
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