The financial side of running a business can be one of the biggest hurdles for first time business owners. In fact, according to a US survey, 54% of small business owners rate ‘budgeting effectively’ as one of the major challenges of operating a business.
It’s no secret that it's important to get your finances in order early on and figure out exactly what you need to spend money on, and what you can do without. Some start up expenses are unavoidable and well worth the investment, while others are unnecessary and may slow down the growth of your business.
We’ve created this list to help you determine what business expenses you need to consider for your start up and costs you can probably do without...
Let’s start with some costs to avoid:
Expensive and unnecessary software
When you’re writing up the start up costs for your business plan, you’ll need to determine what services or programs are going to be essential for you to run your business. You might be tempted to purchase the latest software or a new gadget that promises to make your job easier, but try to hold off.
Remember, you can always upgrade as your business grows. You don’t need the latest subscription service or app right away. When the time is right, you can revisit these costs but you don’t need to include them in the start up phase.
Staff before your business is ready
It’s exciting to get new employees on board, but it’s important to hire people for the right purpose. You might start with one or two staff members to lessen your workload, and as things pick up you can hire more people. More hands on deck doesn’t necessarily mean less work for you or even more business, so keep in mind that staff numbers should reflect the workload rather than try to anticipate it.
A larger office space than you need
The first Apple computer was designed and built in Steve Jobs’ parent’s garage. There’s no shame in starting a business from your home or garage—some of the biggest companies in the world started this way! Start small and work your way towards bigger and better things, this way you can keep your costs low. An office that’s too large for your needs is going to become a burden quicker than you realise especially since you have to consider rent, equipment and furniture to fill up the empty space.
While there’s nothing wrong with wanting to create a pleasant ambience with some nice pictures hanging on the walls or plants to liven up your space, your start-up could probably do without the $9000 leather couch and marble coffee table. Decorating and interior design is something that can be built upon over time, and it is possible to create a stylish look on a budget!
Now, let’s get into the costs that are non-negotiable:
At the very core of your business, there are going to be admin costs ranging from accountant and solicitor fees right down to things like office supplies. If you have a business website you’ll need to take into account domain registration fees, web hosting and design. These costs are going to be important in the set-up of your business, and many of these are mandatory, including:
- ABN and business name registration
- Licences and permits
- Intellectual property rights protection
- Accountant and solicitor fees
- Insurances (liability, indemnity)
Depending on your business, you may not need them all but as your business grows you’ll need to stay on top of these costs.
Operations costs include things like your internet, phone and utility bills as well as any software or equipment you’re going to need. Depending on your business, the amount you invest will vary. Consider what is essential to helping you run your business and if you’re unsure, do the research for your industry.
Equipment is every machine you will need to maintain the operation of your business. This could be a cash register, coffee machine, cleaning equipment or a computer.
Depending on the type of business you are operating, products and services are going to form part of your budget. Things like stock or inventory, materials and goods. If you’re a service provider you may need to outsource some tasks, so you’ll need to take that into account when you create your budget.
Marketing and sales
Every business should invest in marketing. Marketing is about creating brand awareness, generating customer interest and developing a competitive position in the market. These are all things that don’t just focus on short-term sales, but also the long-term growth of your business. Marketing can also provide the necessary research to improve existing products and roll out new ones. Some expenses associated with marketing include:
- Market research
- Public relations
- Brand management
- Digital marketing
You can read more about business costs here.
As a budding entrepreneur, it’s important to educate yourself about how to run every aspect of a business, including the financial side. Upskilled’s Administration and Business courses can provide you with tools and resources to build upon your knowledge and transform your business.
Whether you’re opening a cupcake bakery or following your dream of owning a tech start up, every business has the potential to be successful. It all starts with making wise financial decisions and treating your business as an investment.