Owning and/or running a small business is an incredibly difficult job and it takes a very special kind of person to keep track of all the ins and outs. While taking care of the major aspects of running a small business, there are a few things that often get overlooked.
In case of certain expenses, these oversights can result in a whole lot of trouble which is why we will try to identify these potential money pits in this article and give you a few tips on how to prepare for them.
So Much Paperwork and Legal
One of the first things small business owners and managers learn about their job is that they will spend the majority of their time buried under ten feet of paperwork, with new paperwork being piled on top faster than they can get it done. It is probably the most depressing aspect of running a small business.
For one, there are the innumerable licenses that they need to take care of, permits and surety bonds depending on the industry. Then, there are so many taxes and benefits to keep in mind that it soon becomes this homogeneous mass of paperwork which can put quite a strain on a business owner.
In addition to being quite annoying and time-consuming, all of this costs money. Pretty much every paper that is signed is also an expense that the small business has to cover. And this is not even factoring in legal fees which are always present, even when everything goes the way it should.
The Hidden Costs of Having Employees
Figuring out how much your employees will cost you should be a straightforward matter, right? Well, in reality, your employees will cost you far more than you could have imagined. For example, an employee that you pay $50,000 a year will actually cost you at least $60,000 thanks to benefits, taxes, workers’ comp and other additions to their annual salary.
Another employee-related expense that most small business owners overlook, especially in the early days is the cost of replacing employees. There is a good reason why employee turnover is something most companies with to control as successfully as possible.
For one, if you fire someone, the chances are you will have to pay out a severance package. If they leave you and you are not careful, your insurance company will probably raise your unemployment insurance rates. Also, when you take on new employees, you will have to spend time and money onboarding them and getting them up to speed.
Things That Go Wrong
If there is one thing you can count on as a small business owners, then it is that things will go wrong. Often. In ways you couldn’t dreamed of. Sometimes these problems will occur because people make mistakes and sometimes they will be a simple consequence of running a business that depends on too much human factor.
For instance, one of your employees might bungle up an account because they overlooked a single cell in the Excel spreadsheet. Or, you might experience a burst pipe that floods your offices and you cannot work for a week. Anything you can think of can happen and more often than not, you will discover that these things cost money.
The best way to prepare for this is to allocate a budget for emergencies. It does not have to be anything spectacular and you can build it up over time, but it is important to have it. It is just as important to remember you cannot control everything. Staying calm will usually prevent more unexpected and bad things from happening.
You will most likely discover that your small business comes with certain idiosyncratic expenses of its own and you will need to cover those too. The important thing is to be prepared for the event of your money going out without you expecting it.
That is the first step.
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