Running a business can be expensive. You know you have to pay for things like payroll, rent, and inventory, but there are many other costs you'll need to account for—and some may come unexpectedly, especially if you're still new to the game. Following are eight costs to keep in mind.
1. Payment Processing Fees
Be sure to consider payment processing fees as you set your budget. Credit card acceptance is practically a must for businesses these days, as fewer people carry cash. These transactions come with processing fees, and they can add up over time. Merchant services can help make getting paid quick, easy, and
efficient—streamlining transactions and improving the customer experience. Look for providers that offer transparent pricing and tools that integrate smoothly with your point-of-sale systems.
2. Shrinkage/Inventory Mistakes
Inventory loss due to theft, supplier errors, or mismanagement can cost you—and also distort your impression of how your business is performing. For example, you may think you have more products to sell than you really do, which can lead to customer frustration and inaccurate forecasting. Discrepancies can cause inefficiencies in purchasing decisions and lead to cash flow problems. Theft is part of the issue, but it's not the whole picture. Minimize inventory mistakes by ensuring employees are well-trained and by utilizing inventory management systems that reduce human error.
3. Shipping
Shipping costs can also add up, and without some consideration, you may be paying more than necessary.
"Shipping is a broad cost category, and as a result, it’s easy to underestimate how much your business spends on shipping," says Emily Heaslip at the U.S. Chamber of Commerce.* "Multiple details inform a package’s shipping cost, including packaging material, dimensional weight, shipping method, the carrier, and insurance. If you choose to offer free shipping or international shipping,
these costs can increase quickly."
She adds that businesses should monitor their shipping budget by choosing options wisely and working with multiple carriers to find the most economical partner based on the weight of each package.
4. Technology and Subscriptions
Don't forget to account for the cost of the different technology and subscriptions your business uses, such as Software-as-a-Service (SaaS) tools. You may also need to pay for upgrades to computers and mobile devices, or for services you aren't currently using but may need in the future. Conduct regular audits of software and tech used throughout the company and ensure you're only paying for what you actually need. Look for free or lower-cost alternatives to reduce expenses.
5. Insurance Costs
Insurance isn't necessarily an unexpected cost, but it might include expenses you don’t anticipate. Rising premiums and surprise deductibles can get expensive, and you'll need liability, workers' comp, and property insurance. When unexpected increases arise, they can put a dent in your cash flow. Plus, if you ever need to file a claim, the deductible can be a major financial inconvenience. Review your policies each year and look for competitive rates to avoid any major surprises.
6. Equipment
You know you'll need to buy equipment, but you can't always predict when something will need to be replaced or when a new, better model becomes available that could improve your operations.
"Every business needs equipment, whether it's a point-of-sale system, refrigeration units or inventory shelving," says Elie Katz at Forbes.** "The upfront costs of buying new gear can feel like a huge burden, but there’s more than one way to get the tools your business needs without breaking the bank. The secondhand market is filled with opportunities. Auctions, online marketplaces like eBay, or refurbished options from trusted sellers often offer equipment at a fraction of the price of new items. These options can save businesses money without compromising on functionality. Another option is leasing or renting equipment. This spreads the cost over time and can provide more flexibility. In some cases, leasing agreements include maintenance, eliminating an additional repair expense down the line."
If purchasing upfront isn’t feasible, equipment financing options may be available to help spread out costs and preserve cash flow.
7. Employee Turnover
Employee turnover is simply a part of business, but when an employee quits or needs to be let go, it can be costly due to the time and resources required to recruit, onboard, and train a replacement. There is also a temporary loss of productivity to factor in. If you have a high turnover rate, these costs add up and can eat into your profits. Do everything you can to increase employee retention. Offer growth opportunities, fair pay, and a workplace culture that employees value.
8. Opportunity Costs
Finally, opportunity costs can be unexpected because you'll never truly know the extent of the money you're missing out on. When you and your team spend time, energy, and money on the wrong projects or inefficient processes, you may be losing revenue from better opportunities you should have been pursuing. Make informed decisions and focus on opportunities with the highest likelihood of benefiting your business. Avoid time-consuming projects with a high probability of failure.
When you're focused on the big picture, it can be easy to overlook expenses that quietly chip away at your profits. Keep these eight costs in mind as you budget for your business to avoid any negative surprises.
* https://www.uschamber.com/co/run/finance/small-costs-that-add-up
