If there is one truth you can rely on in running a business, it is to expect the unexpected. Unfortunately, many business startups fail to prepare for the very real barriers to growth. If a business is not careful, many of these “hidden” costs can result in delayed profitability or, worst case, shutting down the possibility. Consider the following common unspoken expenses many businesses overlook, so your business can avoid being one of the many new establishments that closes before they hit the 5-year mark.
1. Permits and Licenses
For many business types, it all starts with permits and licenses. Some industries require a license for a business to legally operate. This licensing can end up being expensive to acquire, and many permits and licenses are rarely a one-time expense. It is important to do your research and find out what paperwork is required to be able to operate in your community. You will also need to factor in how often that paperwork will need to be renewed, and how much it will cost.
2. Office Space and Utilities
In the rush of getting the business set up, increasing inventory, hiring the right team and funding product development, the cost of the office space itself and utilities often become an afterthought. Because renting a space or purchasing property is such a huge expense, it is critical that this aspect of the business receives just as much attention as other costs. Can you get away with a temporary office space? Or can your startup operate from home at first? Keep in mind, depending on zoning and regulations, you might be required to have something more official.
3. Equipment Management and Upgrades
Most entrepreneurs know that getting their business off the ground will require equipment purchases of some sort. However, many fail to consider the cost of equipment management and upgrades. Make sure you include basic office equipment in your budget (computers, copiers, scanners, etc.), and try finding deals on sites like Overstock or eBay.
These checks will be the most important monthly checks your business writes. The important thing is to develop a good relationship with your insurance provider, and to periodically review your coverage. At minimum, your business will need employer liability and public liability coverage. It is also recommended that a business have insurance for illness, injuries, negligence and properties.
5. Cash-Flow Management
On the list of reasons why business startups fail, cash-flow ranks near – if not at – the very top. All too often, entrepreneurs see that their business is profitable and assume that all is well. Even though your business is profitable, it can still suffer from negative cash-flow. The key is to establish cash-flow management from the very beginning, and then diligently review your business’ financial statements to ensure positive cash-flow.
Where to Find Quick, Flexible Cash Solutions
If your business is having problems with sustaining positive cash-flow due to unexpected costs, never fear. You still have many options at your disposal. In this situation, many businesses turn to the traditional small business loan, but are not always approved for funding. Some businesses are simply too “high-risk” from a bank’s perspective, so they turn them away.
Thankfully, alternative providers like First American Merchant have years of experience in helping business secure the flexible business funding options they need to cover day-to-day expenses and fund plans for growth. If your business is considered “high-risk” and needs quick cash, consider what a merchant advance from FAM can do for your business. Secure the capital you need in as little as 24 hours.