7 Expenses Entrepreneurs Commonly Overlook
As entrepreneurs, we often forget about the expenses associated with running a business. Sometimes our ideas and enthusiasm get the better of us and we let our imagination run wild, leaving practicality behind.
The prospect of making a a large amount of money from a a new and innovative venture, can blind us from the financial reality of keeping a start-up business afloat.
Too many times, a business plan will not include expenses a company will incur past the start-up phase. One of the biggest signs of inexperience and lack of preparation is not planning for your operating expenses.
7 Expenses Most Entrepreneurs Fail to Prepare For, by Jayson Demers, a contributor for Entrepreneur.com, goes into the 7 most common expenses that businesses forget about while in the start-up phase. The following are the expenses Demers included in his article:
Taxes: It's easy to forget about the taxes your business will have to pay when you don't make a profit your first couple of years. However, if your business idea does work, you will find yourself giving a good chunk of your profits to Uncle Sam. Don't forget, once you are incorporated and paying yourself a salary, you will introduce yourself to double-taxation. This means that you will pay taxes on the corporate level as well as on your personal taxes.
Insurance: When transitioning from a hobby to an official business venture, most entrepreneurs forget to consider insurance. Depending on the service or product you provide, is whats going to dictate what kind of insurance you may need to protect yourself and your business.
Human Resources: All of us like to believe that we can do everything ourselves. Unfortunately, not everyone is a Jack of All Trades. Acquiring new business is all it can take to remind us that we need additional labor. Hiring employees will cut deeper into the profit margins and cause us to reevaluate the financial model.
Emergency Repairs: Running a company won't always be a smooth operation. In fact, most of the time you will test your problem solving skills. At any moment a piece of equipment can break and will require you to be quick on your feet to find a way to fix it, which most of the time will cost money.
Subscription Software: The 21st century has significantly changed the way businesses are run. A sophisticated software has become a necessity for any category of business you can think of. Software engineers have found their place in every industry.
Utilities: No matter what business you're in, you will likely incur utility expenses. This is one of the most important things to consider because this will effect where you will operate. For example; larger spaces require more electricity to power the facility.
Employee Expenses: This does not refer to salaries. These expenses refer to the cost of supplying the employee with the right office equipment so that he or she can do the job. This can include computers, pens, desks, etc.