Posted by Shivali Anand
January 31, 2022 | 5-minute read (814 words)
Entrepreneurship is demanding and time-consuming. As a business owner, you are ultimately responsible for ensuring that tasks are completed and that everyone is paid.
Sales, marketing, finance and client development — on any given day, you'll need to dip into all of these areas and perform well to boot. You'll also probably be doing it all on a tight budget, which will add to the stress.
Managing the company's finances is, without a doubt, the highest priority for owners. Money is the most likely aspect of a small business' operations to be mishandled by its owners, which can lead to an abrupt closure. Controlling the budget and avoiding a deficit entails meticulous preparation and contingency planning.
Five of the most commonly reported costs that small business owners overlook are below.
Estimating costs and determining what is required
Many new entrepreneurs underestimate the expenses associated with getting their company off the ground. It is unrealistic to expect the firm to generate income immediately. But numerous costs will be incurred right away.
This means that business owners must plan ahead of time for how and what they will spend in the coming months. There could be registration costs, licensing fees and regulatory fees, which may be one-time or ongoing expenses. Poor cost estimation might spell doom for a venture in its early stages.
Every business owner should analyze what resources are required to get the company off the ground. Starting small and expanding gradually are key. This means your investment is covered and your budget or resources are limited in terms of exposure to the "real" world.
If you can work from your home and avoid paying monthly rent, it’s like putting funds in the bank. It's even better if you can accomplish the work without paying an in-house employee. Smart business owners cut unnecessary salaries and set up a low-cost outsourced solution.
Gaining a better understanding of the many sorts of expenses your company will face is half the battle. Some costs will be one-time, while others will be recurring; some will be mandatory but others may be avoided.
Office rent, for example, is set in stone. But variable charges, such as payment processing services, must be factored into the budget. You should anticipate paying somewhere between 1% and 3% for every transaction, depending on the payment method you use. For higher-risk payments, this cost may be higher. This may be great for an established company, but it can be disastrous for a startup.
Website construction, rent, office equipment such as furniture and electronics, labor, supplies, permits, branding, marketing and advertising are just a few of the most frequent expenditures associated with starting a new business.
Deferred payments and cash flow
Cash flow is inextricably linked to costs, even if it is not technically a cost problem. A company's ability to estimate and achieve cash flow is critical to its long-term viability.
Part of cash flow ensures that the money you earn from services supplied flows and cancels out the expenditures you've already incurred. Keep track of the interest rate, the quantity borrowed and the money you require if you need to borrow to cover expenses. Check whether any money coming into the company can cover a cost that might have been avoided.
To guarantee that clients' payments are received on time, you will need to put in some effort. Giving clients more flexibility may be an excellent approach to grow your business, but recurring expenses will continue to mount. Late payments will result in needless interest being paid to third parties. Outsourcing may be a viable option for keeping your expenses in check.
An office isn't required for every company. Leasing one requires a significant amount of your resources, energy and time just to get up and running. Not to mention the expenditures, which you will bear from the beginning. Consider investing in a shared office space or work from home to save money and time. Working remotely and bringing support personnel online during the "new normal" saves money for many organizations. Look for attractive bargains and hire freelancers. Anything that will help you save money will also help you earn money.
Advertising and marketing
You might not think about marketing and promotion if you're simply focused on running a lean operation. But unless your brand is well-known, you'll need to market it. You may need to choose between B2B or B2C marketing, or to leverage both.
Paid television, radio and internet advertisements, as well as outdoor, social media, email marketing, sponsorships, promos, influencer and loyalty programs, to mention a few, are all effective ways to raise awareness. The sort of business, product category or commodity you deal with, as well as your marketing approach, will determine your marketing and advertising budget. Remember that employing a professional to handle your marketing and advertising initiatives will come at a cost.
