We all know that it costs a lot of money to run a business. For starters, it costs a whole load of money to start up a business. Financing your startup can be a tricky task as you’re looking for big sums of cash. But, there are also plenty of running costs that you must consider too. Take a look at three of the biggest running costs a business will face:
Purchasing Materials & Resources
Many people tend to forget about this when they consider starting a business. For some reason, it seems to slip their mind! Maybe it’s because you get so caught up in the excitement of a business plan, that you forget you have to buy a lot of stuff to run a business.
Firstly, you’re going to be buying all the direct materials and resources that your business will sell. These are unavoidable costs that you have to pay for, so your business can actually sell things and make money. Then you have the indirect materials and resources that all businesses will buy. I’m talking about things that you aren’t going to sell on. Office equipment is a great example here. The costs of these things can slowly add up over time, especially if you’re buying from the wrong people. It’s important that you cut down on procurement costs if you want to save money during the startup process.
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A regular expenditure will be your office rent. If you choose to rent office space, this will cost you money. Rent will usually vary depending on the office size and quality. If you have a small standard office, it won’t cost you as much as a super modern, massive, one.
Either way, office rent will be coming out of your budget every month. So, when you’re making a financial plan for your business, you must remember to include this. It may be better off to start working from home at the beginning. You can save money on office rent, and slowly build up your finances to the point where you’re able to afford an office. That’s my number one tip; never rent an office you can’t afford. No matter how cool or professional it will make your business, if you can’t afford it, don’t pay for it!
Of course, every business will have a range of employees. Obviously, employees aren’t going to work for free. You have to pay everyone that works for you. Normally, this payment is made every month into their bank account. You stick them on your payroll and deposit the money monthly. Sometimes, businesses may pay weekly, it depends on the business and the work being done.
In some cases, businesses look to outsource their work. So, they may not have many employees to pay, but will still pay the outsourcing company. This can save a business lots of money, and it’s well worth looking into. But, you’re still going to be employing this company, so it will still be costing you money. Paying people/companies to work for you will always be one of the biggest running costs a business will have.