While starting a new small business can be exhilarating it can also be an anxious time. New small businesses fail for a variety of reasons. These can range from poor planning, a lack of business acumen, incorrect pricing, unwanted product or services, mismanagement, unsustainable growth, poor sales, and inflexibility.
However, one of the most common reasons small businesses fail is financing. Many small businesses don’t secure the funding they need to thrive. Unfortunately, they place all their bets on traditional funders such as banks. Such financial institutions are risk-averse. They may require a good credit score, strong cash flow, collateral before approving a funding package. To make matters worse, they can take months to process your application and deposit the funds.
Many small businesses need funds quickly to take advantage of profitable business opportunities. Others need funding to pay operational costs. That’s why many small and medium-sized businesses turn to alternative funding experts for help securing funds through fast and flexible options.
When seeking funding for your new small business, it’s important to know what costs you may need to pay. By being prepared, you’re less likely to be caught by surprise.
#1 Incorporation Costs
A cost all small businesses must pay when setting up is incorporation fees. You’ll need money for licensing, permits and more. The amount of these costs can depend on local and provincial laws and the nature of your business.
#2 Rent and Utilities
Unless you’re buying property for your business, you’ll need to rent a space to conduct operations. The costs depend on the location and the square footage required for you and your employees. If the location isn’t important, you can reduce this cost by renting further away from the business district.
Alternatively, you can start your business from a place of residence. Many famously successful businesses were started from a basement or a parent’s garage. Working from home can also help you control your utility bills.
#3 Inventory
Unless your business only provides a service, you’ll need funds for inventory. It’s important to budget for the right amount of inventory. If you don’t have enough inventory, then you could risk losing business as frustrated customers turn to the competition. On the other hand, certain items can go bad, get damaged, go out of style, or become obsolete. Find the right balance by doing market research.
#4 Office Supplies
While your new business should control its office expenditures in its infancy, it’s also crucial to have furniture and supplies to maintain company morale and boost productivity. You may need phones, desks, chairs, computers, printers, scanners, paper, pens, staplers, files, software cabinets and shelves. You may also need a coffee maker, fridge and microwave.
To save costs, consider buying gently used office furniture. Many small businesses sell good equipment as they expand or move on. Alternatively, you may lease some equipment, especially if it’s at the risk of becoming outdated.
#5 Salaries
It’s crucial to pay your employees on time with competitive salaries to maintain morale. Some startups offer shares in the company in exchange for less compensation during their infancy.
These are the five main costs of running a business. You’ll also need funds for marketing, a website, a social media presence, consultants, insurance and more. With a realistic understanding of your financial needs, you can help your small business reach its goals.
