4 Hidden Costs Of Running A Small Business
Have you ever posed to ask yourself why more than half of startups fail within their first five years of existence? It is a reality that we have to live with and many people do not know what contributes to this trend. When most people think about running a business, all that comes to their minds is the freedom and becoming one’s own boss. However, running a business is not easy and also comes at a cost which many people do not understand until they get their hands on the daily operations. The following are some of the hidden costs of operating a small business.
Fees and permits
The requirements to set up a business will vary from one industry to the other. It will also depend on the region that you want to operate in and legal documents that the government of the day requires. In Kenya for instance, you are required to acquire an operating license from the county government. The amount you pay will depend on the type of business and form of operation that you wish to run. There will be different fees for a company and a sole proprietorship. Others fees and permits that you will require may be health and others from relevant environmental bodies.
Office space or business premise
Most of the business owners have their physical points of sale where they sell their products. The landscape is however changing and we now have digital products. We also have online merchants who sell their products remotely and just organize for delivery. The office space does not have to be physical for those who sell services and digital products. For instance, an online shop might require a domain name and hosting of its website. This compares to the office space that others rent physically. You have to consider the amount you need for this space when planning your business.
Maintenance and upgrades
When most people buy office equipment, they think that they will last forever. A computer that was fashionable ten years ago might not support the applications that we have today. Your machinery may as well wear out and require maintenance once in a while. You cannot continue using the same machinery and expect to keep up with competitors who are updated and using the latest technology. However, ensure that you consider the durability of every system that you intend to buy to avoid misuse of resources.
Shrinkage
This cost mostly affects those who operate businesses that deal with physical products. Take for instance when there is shoplifting or theft by your employees. Your overall profits will be affected in the long run. There can also be accounting errors irrespective of whether you deal with physical or digital products. Shrinkage costs are always a misery in most businesses and most are unexplainable. As a smart business owner, you can come up with measures that will reduce shrinkage but it is hard to do away with it altogether.
There may be other costs but the above are the major ones. The overall effect of these costs will vary from one business to the other. Understanding the impact of each cost is essential if you want to run a sustainable business.
