Setting up a business can be exciting, but without the right preparation and planning, your business is likely to flop. Taking into account your costs and expenses from the start will give you a good idea of whether your business will succeed or fail, and if it looks as if it might fail, what you can do to save it. Here are the most important costs you need to consider.
Start-up costs are one-off payments that you make when you initially start your business. This includes things like buying a property if you plan on buying a space outright from the start (although it may be wiser to rent or work from home originally), advertising for the launch of your business, and transportation. You’ll also need to factor in any furnishing, equipment or services you need to hire in order to set up in the first place, as well as the installation of services such as Wi-Fi. When you think about it like this, it can all seem like a lot of money, but it’s worth remembering that once your business is up and running, this will most likely pay for itself.
There are also fees you’ll need to pay on a regular basis whether or not your business is turning a profit. There are the more obvious costs like wages, stock and equipment fees, but you also need to factor in costs such as energy supply, rent, and business insurance costs. To make sure you are not paying over the odds, you can use sites like Utility Bidder to compare British Gas business energy rates with other major suppliers. You can switch business energy supplier to get a better deal and save yourself some money. Insurance is a big one, as there is lots to consider – some major ones include Employers’ Liability Insurance (this is a legal requirement), public and product liability insurance, and building and contents insurance.
Variable costs will also need to be paid regularly but are subject to change over time. This is because you’re bringing in more sales as your production rate increases, and thus certain things will be needed in greater supply or may change price. One example is product costs – these are likely to change over time, since as your business grows, you’ll be needing more and more of your product or materials Often, the more you buy, the less you pay per item, so you should end up paying a better price in the future.
Delivery is also something liable to change – it can vary depending on the number of products you’re selling, as well as if you move towards a specific product. Wages is also a variable – it can come under both variable and fixed, depending on your business. If you plan on paying your employees a fixed rate, then this will be a fixed cost, however if you pay them by the hour and they don’t work a set amount every week, their wages will most likely change.
Use these three costs to help you figure out how much money you’ll need initially, as well as how much money you’ll need to make to keep your expenses in check. Take your time with it, and you’ll be sure to be a success.