It Takes Money!
What are some of the implicit costs an entrepreneur can face when running a business? And more important, how can you be ready for them? Find out here some great written examples of business startup expenses to help you.
Simply put, there are five specific categories which every entrepreneur will run into which involve paying out monies to stay in business; these are known as implicit costs, or the costs which you must always be ready to cover. The categories are taxes, licensing, maintenance, advertising and insurance. Let’s take a look at each.
Every business, no matter what it sells, pays taxes of one form or another; most likely more than one type of tax. What are some of the implicit costs an entrepreneur can face in the tax area? Local and state sales tax, self-employment tax, corporate tax and fuel taxes are a few. Taking a small percentage out of each sale, say 15%, will ensure you have enough to pay the taxes.
This is one area often overlooked by beginning entrepreneurs. Maintenance is essential to continuous operation of any business. What are some of the written examples of startup business expenses an entrepreneur will face in the maintenance department? Computer upkeep is one for every business. Security is another maintenance concern for both service and retail operators. Vehicle maintenance is the biggest for service businesses. For retail operations, it is the appearance of the location, both inside and out. Tools, machinery, and equipment will need maintenance from constant use. By doing preventative maintenance and budgeting for it each month you will avoid huge sudden costs in this area.
Another area which must be considered in the implicit cost categories is advertising. No business, no matter how new or established, can’t get by without advertising of some kind. So what are some of the implicit costs an entrepreneur can face from the need for advertising? There are simple forms of print media and visual signs such as business cards and vehicle or store lettering. There are radio and TV ads. There are also meetings and presentations which need samples of your product. These are all forms of advertising and all are needed at one point in time to keep your business in front of people so that you’re not forgotten. A simple way to be ready for this is to take 1% from every sale. It may be pennies from every dollar but this method does ensure the ability to pay for constant advertising.
Licenses and Certifications
Licenses and forms of certifications are needed by all businesses in one form or another. There are costs which come with these as well. The cost for business and occupancy licenses and permits is among these. Various certifications for different businesses to operate are also in this category such as food licenses for anyone serving food or contractors licenses for anyone doing any construction or repair on property. Specialty permits for mechanics, fuel sales, and hairdressers may be required by both local and state agencies. Planning ahead is the easiest solution for this category. Knowing which permits and licenses you need, and keeping them current is part of everyday business.
The last category is insurance. While some startup businesses may not think this is necessary, if you are found without it, it could cost you both your business and your personal finances. What are some of the implicit costs an entrepreneur can face for insurance costs? Liability insurance is the most important; followed closely by business loss insurance and property insurance to cover financial loss from damage to your business or property. This is another category which doesn’t always have constant monthly payments, but you should set it up this way. Using monthly installments into an account will help keep insurance coverage along with potential unseen situations which require extra money.
Planning the use of every dollar may seem tedious at best; but if you utilize these written examples of business startup expenses and also start planning for the implicit costs of operating a business, you won’t be caught off guard and potentially damage the operation to the point of killing the business.
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