Beware Of Hidden Costs In Your Small Business
Obvious costs are usually planned for. However, hidden costs will drain your money and time without your knowledge. These costs in fact are not hidden, but get overlooked when you factor in the major expenses. If you are aware of the hidden costs, you can avoid unpleasant surprises. Besides, small business costs can be reduced to a certain extent by managing the hidden costs.
In the excitement to get the business started, many small business owners forget about the business licenses. Business licenses and permits are required to start and run a business. You have to register your company name as well. If you want to register a brand name or trademark, things get more complicated.
Licensing requirements for a small business vary according to the type of business and its location. Although minimal, costs of getting business licenses are mostly overlooked. However, ignoring the required business license and permits will cost you more in future.
Another hidden cost in a small business is taxes. While great care is taken to pay regular income tax, other applicable taxes such as self-employment tax, payroll tax, and FICA tax that includes Social Security and Medicare taxes, are often ignored. Again, these will later come up as unexpected costs and attract penalty as well.
When you raise a loan for your small business, you may not notice the hidden costs that come along with the loan. You may be so engrossed in getting the money that you won't realize how much you are spending to get that money. If you take a closer look, you may even find the loan quite expensive. Processing fees, documentation fees, third-party fees, government fees, and other similar expenses, fall into the category of hidden fees. However, these will be clearly stated in the contract. Read the contract carefully and clarify any clause that you do not understand. Fees directly charged by the lender are often negotiable. Additionally, you should be aware of the other costs, such as pre-payment penalties and refinancing charges. Small business costs can shoot up significantly just because of these hidden charges in a bank loan.
Insurance is another component that increases small business costs. However, insurance will prevent you from shelling out cash from your pocket in case of an unfortunate event. It is mandatory to purchase business property insurance, liability insurance, and unemployment insurance. It is advisable to buy a health insurance package for your employees.
A small business owner faces a lot of difficulties in dealing with banks, licensing authorities, and other organizations that fall in this category. Ignorance can be costly in these cases. This makes the services of a legal professional essential. This is another factor that needs to be considered as hidden cost in your business.
When you consider costs, many a time, a small business owner will not consider the cost of time spend on various activities. Spending more time on any activity increases the costs associated with it, though not tangible. Moreover, you need to consider the time you spend away from the family when you try hard to grow your business, which also has a cost attached to it.
As a small business owner, it is important to be aware of these hidden costs in your business. Apart from including these costs to your estimated capital requirements, you can also try to price your products or services after factoring in these costs.
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