Hidden costs of starting a new business

Hidden costs of starting a new business

Starting a business is probably one of the most exciting things you’ll do in your lifetime. The freedom of doing your own thing is priceless, yet many entrepreneurs cite cash flow troubles as one of their biggest challenges. We’ve put together a list of common burdens to watch out for as you budget for your new venture.

Employee costs

As your business grows, you’ll need to hire staff to help you out. Remember that even if you pay an employee R10 000.00 per month, that is not the true cost. As a general rule of thumb, business owners should to expect an employee to cost 25-30% on top of a base salary each year. This additional cost includes fixed expenses such as taxes, UIF, uniforms, training courses, paid time off and perks/entertainment (e.g. staff discount, parking and monthly drinks), as well as soft costs such as recruitment fees and the time and tools required to train a new employee.

Consultant costs

It’s great to do your own marketing and taxes but you might find it takes up more of your time than you can afford. Professional services, however, come at a cost, so remember to budget for your marketing/social media services and your IT provider, recruitment consultant, accountant and tax specialist. You will also need to allow for banking and legal fees.

Maintenance

Put away a fair bit of money for unforeseen maintenance to your premises, machinery or computers. From leaking roofs to a broken air-conditioner to weather damage to your signage, you never know what bad luck might hit you next. If you rely on machinery, you also need to factor servicing and repairs into your budget. Rather spend the money on a regular service to keep equipment in a good running condition, than being stuck with having to buy new equipment. You can protect yourself by getting insurance cover that includes business interruption and machinery breakdown cover.

Taxes

Don’t be caught off guard with a huge tax or VAT bill. These matters are best left to the professionals, to ensure that you comply with SARS regulations and that you put away enough money each month to be able to pay what you owe. Also get advice on your responsibilities as an employer – registering with UIF and paying relevant union fees.

Technology

Cloud storage, software licences, computer accessories – the list goes on. Any business relies heavily on being online so be sure to keep money aside to keep your infrastructure ticking over.

Insurance

It’s another cost that might be more than you bargained for but insurance is without a doubt one of the most important expenses in your business. As a bare minimum, you will need employer and public liability coverage. It’s also a good idea to take out business interruption insurance, protect your property and stock against fire and flooding, and cover your business vehicles.

Santam’s cover for small businesses start at just R162/month – speak to your broker to see what cover your business needs, read more about our focussed small business insurance or visit our blog.

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