According to a recent study, 2 in 5 Americans plan on starting their own businesses in 2023. There are many reasons for this surge in entrepreneurial desires – with many workers wanting to improve their professional agency and work-life balance or pursue a career they are truly passionate about.
As such, if you’re considering starting your own business in the new year, you must set yourself up for success. One way in which you can do so is by having a clear understanding of what you are getting yourself in for. You should understand the trials and tribulations you will face alongside the triumphs so you are suitably prepared.
While the challenges you’ll fancy vary from industry to industry, the most significant barriers faced by small businesses are often financial. This often boils down to the fact that many people do not realize how much it costs to run a business.
What Are the True Costs of Running a Business?
To guarantee success and longevity for your business, it’s better to understand your financial situation sooner rather than later. Whether you’re investing your own money or have received financial support, this often begins by putting together a clear budget and sticking to it.
Again, budgets can vary widely between industries and businesses. For example, a tattoo parlor may be cheaper to run in one state than another, depending on rental fees in the area. Doing a little research on the average cost to run a business in your local area is a great place to start.
You should then write down a list of everything you’ll need to pay for (i.e., your expenses). Sticking with the example of a tattoo studio, this could include:
- Rent/Mortgage. In addition to rent or mortgage fees, you must also cover the cost of utility bills.
- Equipment and technology. There’s plenty of equipment that you must buy ahead of time to run a successful tattoo studio. Beyond the obvious tattooing equipment, this includes items such as stencil paper.
- Employee salaries. Whether hiring a receptionist or a social media manager, you must ensure you can pay them a fair salary. Outsourcing these duties can help keep costs low when your business is in its infancy.
- Your own salary. According to a recent study, only 50% of business owners actually pay themselves a salary. While you may be keen to invest all your money into your brand, you must not jeopardize your financial well-being.
What Are the Hidden Costs of Running a Business?
While some costs are obvious – giving you plenty of chance to prepare for them, some may take you by surprise. For example, it’s important to note that running a business also costs you a lot of time and effort. This is something that is difficult to put a price tag on. Still, it is important to factor into your decisions moving forward. For example, while you may be keen to put in the extra hours and work late into the night, you must also be able to make time for yourself