Owning your first business is an exciting time, but there are several startup expenses that every first-time business owner should be aware of. This finances make up the bulk of your startup costs and will need to be accounted for in your business plan. If you’re looking to get a loan or funding from an investor, you must have a detailed financial plan explaining your projected income and the costs of running your business. It doesn’t matter where you are; Los Angeles or on the East Coast, the fact remains that having a business plan is the best way to secure funding and ensure your business’s success. Keep reading to learn more about first-time business owners’ most common expenses.
- Legal Expenses
Don’t forget about your legal expenses when you’re starting a business. You’ll need to file your business name with the state, and obtain a federal EIN (employer identification number). Your business structure (either an LLC, Corporation, Sole-Proprietor, etc.) will also need to be decided, and depending on how you choose to file, you’ll be looking at significant costs.
A business attorney will charge to complete this paperwork, but you can also complete these types of documents on your own. However, most states will still charge a filing fee, and so you should account for legal expenses somewhere in your budget.
It’s also a good idea to have an emergency legal fund, particularly if you’re creating products that could be dangerous if used improperly. While the LLC or Corporate filing will help protect your personal assets in the event of a lawsuit or settlement, you still want to have funds available to hire an attorney should your business face any legal action.
If you’re running a brick and mortar location, you’ll need to either rent or purchase space. If you need extra production space for your products, you may need to rent another space altogether just to produce what you’ll be selling. This is one of the highest costs associated with starting a business, especially if you’re in an area where property values are higher than average.
Even if you’re planning for an e-commerce store, you’ll still likely need somewhere to produce your items. This cost should be accounted for in your business plan, and you should plan for how this cost will affect your business well into the future. Will you need a bigger space eventually? Will you want a cheaper rate at some point?
Be sure that any property you’re considering is in good condition and can meet all of the needs of your business. The last thing you want is to buy or rent a building that will have structural issues down the road.
If you’re selling products, you’re going to want to stock your shelves! The cost of materials, production, and distribution should all be included and accounted for in your business plan. Depending on what you’re producing, your production costs could be incredibly high; so you’ll want to be sure you’ve got enough funding available to meet the financial burden.
Don’t make the mistake of purchasing cheap materials your first time around. You’ll want to leave a good first impression in the minds of your customers, and to do so, you’ll need to provide high-quality items they’ll want to repurchase in the future. It’s worth the extra dollar to get the better materials so that your business comes to mind when the customer thinks of your industry.
You’re likely going to need to hire some help; whether it be management team, administrative personnel, or simply associates to run your store. This means you’ll have to pay your employees and decide whether or not you’re going to offer any benefits packages to them.
Businesses with benefits packages tend to attract more qualified candidates, especially if you offer a decent health plan. Attracting the right candidates ensures your business will have the best employees available to you; which not only makes it easier to run your business, but also helps you to build a reputation for good customer service.
Make no mistake, customer service should be a top priority for any new business owner. Customer service sets you apart from the competition and solidifies your brand as trustworthy and reliable to the customer. Imagine if you purchased an item, and the company you bought it from didn’t offer any customer service. You probably wouldn’t buy from that company again!
Marketing will account for a large portion of your business’s costs, both in the beginning and later on. In order to effectively spread the word about your product and reach new (and current) customers with promotions, you’ll want to pay for an effective marketing campaign.
Whatever medium you choose, whether it be the internet, television, etc., you’ll want to be sure that your investment is creating results. An ROI, or return on investment, can be measured to determine whether or not the amount you’re spending on marketing is actually having an effect on brand awareness and sales.
Financial advisors are an excellent asset for those first-time business owners who struggle with financial planning. Use the Careful Cents site to compare the best financial advisors and find the best one to suit your business’s needs.
First-time business owners have a lot to look forward to. A growing business can provide both personal fulfillment and financial stability, which is why it’s so important to get the financial aspect right to begin with. Keep these five expenses in mind when you’re starting your business, and you’ll be well on your way to the growth and security you’ve worked so hard for. Don’t forget to create a business plan detailing all of your expenses and project income, especially if you’re trying to get funding from a bank or investor.