6 Crucial Costs for Startups

Business Insurance

Starting a new business is one of the most exciting adventures I have ever been on. Especially when it begins to flourish. It pales in comparison to hearing the cries of my children in their first minutes of life; but like a new-born baby, once the excitement and adrenaline of this new creation wears off, there are those costs that can add stress and anxiety to a very exciting time in your life. Careful planning and preparation for these costs can help reduce the stress as you start out on your new venture:

  1. Office space:

One of the key decisions you will need to make when starting your new business is to either rent a dedicated office space or possibly have a home office. There are many feasible options available which enables you to share office space with other small businesses at a fraction of the price. These arrangements often include office equipment, Internet access, receptionist services and doesn’t tie you into long term lease agreements.

Should a home office be the more suitable option for you, bare in mind your insurance policy – if you work in an office space away from home, everything in your home study is covered by your home contents insurance and building insurance. However, as soon as this space becomes your primary place of business, you will need some kind of home-based office insurance. You will need to notify your insurance broker and inform them of the change – this is key because if your home is broken into and a number of desktop computers are stolen, for example, your insurer could refuse your claim because they were not made aware of your home business.

  1. Licenses and membership fees:

Be sure you understand the permits and licenses needed to operate your business within your community. Don’t forget to factor in any renewal costs these may have. It is also a good idea to consider joining networking organisations such as your local chamber of commerce or industry/ professional groups such as BNI. Participation in these groups can provide great exposure. Usually there are membership fees involved to be part of these groups so factor in these costs too.

  1. Accounting & Taxes:

Don’t be caught off-guard by a huge VAT or tax bill. I would always encourage a new entrepreneur to leave this game to the professionals as too many businesses have felt the wrath of SARS for regulations coming down on them. It is also advisable to outsource your accounting activities to a qualified accountant who can also offer sound advice on any accounting matters.

  1. Employee Costs:

As your business grows and you start to expand, so will your need to hire staff. You must remember that even though you pay an employee let’s say, R10 000 a month, that is not the true cost. As a general rule of thumb, you should add another 25 to 30% on top of that base salary, for fixed expenses like uniforms, paid time off, taxes, UIF, & soft perks like time and tools required to train an employee and recruitment fees.

  1. Technology:

It is safe to say that in today’s business world, if you don’t have an online presence, you’re pretty much dead. It is great to have the desire, and possibly even the skills, to do your own social media posts, SEO and website development; but you will find out that it takes more time than you can afford with starting up a new company – my advice is focus on the income producing activities and leave the rest to the professionals. Every business relies heavily on being connected and being online, so don’t be a penny pincher when it comes to these costs. If your business has a good online presence, it can be found.

You will also need to budget for hardware and software such as laptops, printers, Mircosoft Office (or equivalent) and any other hardware and software needed to run your business – and don’t forget about cloud storage fees!

  1. Insurance:

Last… but certainly not least is Insurance.

Insurance is often a cost that entrepreneurs don’t budget into their initial planning, and even if you have budgeted, it can cost more than you may think. As a complete bare minimum you will need public and employer liability cover. It is also a great idea to take out business interruption insurance (disability insurance for your business), and to protect your property and stock from flooding or fire, along with insuring your business vehicles.

My last thought – make sure you have planned properly… and once you feel like you have gotten to that point then get on with living without regrets.

ryan walsh