If you aspire to start your own business, work for yourself and sell a product or service that that you’re passionate about, you’re not alone. Entrepreneurship has been and will continue to be the one of the driving forces of commerce. Make no mistake about it, running a business is time-consuming and will have its complications, but when done right the reward is worth it. Just to be sure that running a business is right for you, it’s critical to consider the cost of running a business.
While developing a product or working toward becoming an expert so a service is unique and fine-tuned stands out among the obvious expenses associated with running a business, we’ve highlighted a few other costs to running a business.
Salaries
Well-educated and skilled workers are hard to come by in the workforce, and they can expect to be compensated fairly. Whether it’s through their salary, bonuses or other perks, talented employees will demand market value or potentially above market value for their knowledge and skill set. According to the Small Business Chronicle, small businesses spend anywhere between 40 to 80 percent of gross revenue on employee salaries.
While this is a higher number than some may anticipate, spending on employees is the equivalent to any other investment. If you invest in impressive personnel that have the ability to help your business reach its goals, then it seems low-risk to spend the money on them considering the possible return. Furthermore, multiple studies have been conducted indicating that paying more can actually help a company make more. It’s not as simple as just offering more money for the sake of it, but in some cases companies do really get what they pay for.
Real Estate
Office space in desirable parts of your city is viewed as a huge positive to current and potential employees. It also goes a long way in molding a company’s culture. Real estate can also be a large operating expense for companies since it can be a key competitive edge in attracting the right people. Is a suburban office space better for the type of personnel you’re hoping to employ, or is your crowd more of the downtown crowd who enjoys the vibrant city culture?
Furthermore, some businesses experience huge success predominately because of their location. So before deciding where to open up shop, think about both your target buyer and your potential employees. Obviously, choosing real estate will likely determine on the type of business you hope to open. But it could go a long way in both getting noticed and hiring the right people.
Insurance
As the last point indicates, deciding on real estate could be one of the first steps taken before launching your company. And with real estate likely comes insurance. Again, it depends on the type of business you’re running, but there are multiple types of insurance for small businesses. The one that most often comes to mind is property insurance. This will likely cover your business and its assets from natural disasters, fires, etc. But there are also other kinds of insurance to consider, such as worker’s compensation and liability insurance. Your insurance needs will depend on your products and services but shouldn’t be overlooked.
Equipment
Technology companies will need to invest heavily in state-of-the-art software and hardware to ensure that their products have the capabilities that the market demands. Local shops offering tasty fare will have to ensure that they have all the ovens, espresso machines, plates and silverware necessary to serve their guests. The list goes on, but long story short, equipment can be an ongoing cost for businesses. Because of this, entrepreneurs and those running the daily operations should plan on allocating a percentage of their budget for these expenses so they’re not caught off guard when the situation of needing repairs or upgrades presents itself.
Taxes
Is your business a limited liability company, a corporation, a nonprofit, or something else? Knowing the differences between the type business structures you hope to implement will help determine the kinds of taxes that your company will have to pay. Being fully aware of what to expect come tax season can help avoid any surprises or confusion when it’s time to file. Additionally, there are many different types of tax deductions that small businesses can legally use to their advantage. Entrepreneurs who take the time to educate themselves on these will be able to save money invest more in their company.
Business at Concordia Texas
To help you learn the ins and outs of the business landscape, Concordia Texas offers a fully online Master of Business Administration as well as a Bachelor of Arts in Business. Our flexible curriculum works around your busy schedule, so you don’t have to spend time worrying about getting to campus or leaving your work. Learn more about our fully online offerings today.