What costs should I consider if I start a new business?
Building a successful business model is largely tied to making the right decisions.
In order to succeed, new entrepreneurs must carefully consider the costs of launching their life-long dream business.
Because the universal truth in business is that money is needed to make money, these decisions carry extra weight. Each anticipated and unexpected cost is but one piece to a larger puzzle that represents your vision and ambition as a businessperson. So, it’s vital to get it right.
Here are some general business costs you should consider if you are looking to start a new business.
Overhead costs are the price a business owner pays for the resources/staff needed to keep a business in motion. This can include, but isn’t limited to: leasing a property, supplies and employee wages. The good news is a lot of these expenses can be claimed come tax time. Smart overhead management with meticulous organization and strategic vision can be the difference between a business being profitable and running in the red.
The Cost of Market Research
Before launching a business, strategic market research is a must because it can forecast whether a business model will be viable over the long-term. Some of the questions addressed will be the demographics of your potential customer base. A thorough market analysis offers entrepreneurs a quantifiable perspective of their market and potential customer base – and it often doesn’t come cheap. Market research firms and surveying can run anywhere between $5,000 and $15,000, but it usually ends up being worth it.
Depending on the type of business, business insurance may or may not be necessary, especially in the early stages. Inventory and cybersecurity concerns, however, may compel business owners to get such insurance because it provides protection. Not all insurances are created equal though, so do your research and carefully examine the costs and benefits in order to weigh the usefulness and practicality of such a policy.
Taxes are inevitable, even when businesses are running behind projections.
The amount businesses pay to Uncle Sam may come as a surprise to new business owners. Depending on the type of business, whether it’s a corporation or a limited liability company, taxes can be required regardless of how much or little revenue was generated in a given year. A limited liability company structure can offer more flexibility through self-employment taxes. A corporation could be liable for two types of taxes: corporate profits and the dividends it may pay out.
License & Permits
Most, if not all, business require state, federal, county and/or city licensing and in many cases licensing is required prior to conducting any activity for the business. Specialty licenses and permits may additionally apply to certain activity and can be a lengthy and complicated process for approval.
Costs will vary based on the business location and governing rules, but you should be able to search the federal, state and county websites to research the requirements.
The acquisition of capital for businesses is commonly facilitated through equity or debt financing.
A small business loan, known as debt financing, may come with the cost of interest, but with the benefit of not needing to surrender any ownership of the enterprise.
In contrast, equity financing is a method to raise capital in exchange for a stake in the company through stocks. Ultimately, the business owner may have to buy out initial investors to regain full control of the business – and it can come at a high cost.
As business ideas begin to take shape, our services are designed to help business people reach the next level of success. Our advisory services and unwavering attention to the needs of business owners and their future allow them to realize, reach and maintain their business goals. Please contact us today to learn more about our services and how we help your business thrive.