6 Hidden Costs A Business Must Never Overlook
Are you starting out on a new business? Here are 6 hidden costs you must remember to include in your budget.
Costs Involved In Running A New Business
Many people enthusiastically get started on their entrepreneurial journey. But before embarking on it, they must understand what costs are involved in running a business. Without proper plans, any business dream can soon turn into a financial nightmare. Some of the expenses involved are obvious like salary for employees and costs involved in producing goods. However, others are not so obvious. 2020 will be remembered as the year in which remote working became mainstream. Working from home also revealed several other hidden costs. A good budget is helpful, no doubt, but hidden costs can sometimes land you in trouble if not properly understood.
Hidden Costs That Every Business Must Consider
If starting your own business has been your dream and you are passionate about it, you must be ready for the risks it involves. Most people don’t realize that to be successful as an entrepreneur, one needs money, especially in the initial stages.
Here are some of the hidden costs that one often tends to overlook. These pertain to:
- Expenses to Support Employee Benefits
The first thing that any business needs to invest in is its employees. Salaries, personal and medical leave, health insurance, and training costs should be factored into the budget. If a company doesn’t invest in its employees by providing a decent wage, a good work environment, and other office perks, it could result in attrition. Besides, it makes more sense financially to retain an employee than to replace them. Sometimes, it could cost one-fifth of a worker’s salary or even more to replace an existing employee. Benefits given to the office staff need not be fancy. Flexible schedules, telecommuting, and casual dress code are simple benefits that help satisfy and retain employees.
- Employee Tracking to Prevent Distractions
Workplace distractions are believed to cost the US economy over $650 billion/year. Notifications and distractions at work can take away about five productive hours from an employee in a day. This amounts to a huge loss of revenue. Besides, interruptions can have a detrimental effect on one’s psyche and impact employee confidence. Hence companies should rethink their operations procedures to help employees stay away from distractions and improve productivity. An employee tracking software like Flowtrack can be beneficial in such situations. It gives an insight into an employee’s online activities, the websites they visit, files they download, IM chats, and how they have been spending their time at work.
- Building Defenses Against Security Threats
When employees are working remotely, your company is more prone to security breaches. At a time when high-profile cyber-attacks and strict regulations on data management and corporate transparency are rampant, companies must take data storage and security very seriously. According to the Cost of Data Breach Study, in 2021, the average cost of a data breach increased to $4.24 million, which is the highest ever at 10%. Even when remote working was considered a factor of the breach, it was even higher at $4.96 million.
Technological advances have increased the threats of corporate espionage, data theft, and fraud. At the same time, defenses against these have become sophisticated. It is, therefore, all the more important for companies to invest in and set up an employee monitoring software like HRAPP.
- Software Subscriptions to Scale Business
Software-as-a-service (SaaS) and cloud-based software play an important role for a lone entrepreneur to build and scale his business. For example, with the help of online accounting software early on, it is easier to automate invoices and get paid faster, capture receipts, and forecast and prepare cash flows. Many wish to do this manually, but with automation, you can spend time on things that are valuable and require your attention. Consider the options carefully and choose software that suits your business needs.
- Investment in Office Space And Managing Utilities
For many start-ups, a home can double up as an office, but not always. Before investing in office space, you need to plan how much space you need when starting out and how much more when your business starts growing. Temporary office space will work if you are not sure about what the future holds. Consider utilities too, as they sometimes eat into your budget. These include office equipment, Internet, receptionist service, and meeting rooms. Find utility providers who offer flexible-pay options, competitive rates, budget billing, and energy audit programs that can help improve your company’s energy efficiency and balance the costs of improvement.
- Attracting Customers Through Advertising/ Marketing
It is also necessary to include advertising and marketing costs in your budget. This is not ad placement alone but also includes other things that attract customers to your business. These are, writing blog posts, making YouTube videos, hosting events, attending trade fairs, and cold-calling potential customers. You can hire an external agency to handle content creation, manage your social media handles and create ads as these companies are adept in marketing techniques. However, you can handle marketing yourself if your budget doesn’t allow room for extra expenses.
Don’t Forget to Invest in Yourself
When you start a business, keep track of how much time and energy you are spending on tasks that can be automated and delegated to someone else. Time is a very precious resource. Make sure you are not neglecting yourself or your family. Instead of focusing entirely on work, remember to take time off to do things that are important for you as a person. These will help you grow personally as well as professionally.
Starting your own business can keep your adrenaline high and at such times, you might ignore to factor in costs that might lead to financial troubles. Therefore, pay attention to your budget and remember to factor hidden costs into it. Besides relying on your own, it is a good idea to consult those who have been successful in their own business. They might help you with tips and strategies to succeed. If you are passionate about your business, avoid obvious mistakes and watch your business grow.
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