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The costs nobody mentions when you’re first starting your business can add up over time and eat into your profits. In today’s article, we let you in on these dirty little secrets.
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It sounds like a dream, and for many starting a business absolutely is. Despite the potential risks involved, the self-employed lifestyle is one that many aspire to.
However, in those early days, it can be daunting. Instead of being siloed in one area of your profession, as you perhaps were previously, you now have every area to cover.
This is where all sorts of hidden costs enter the picture, the type of costs nobody ever mentions. The ones you could have never foreseen.
Some of these are tiny, but over time they add up. They become a cost that can eat away at your profits. Through today’s article, we’ll look at these costs to ensure you are as prepared as you possibly can be.
Not Hiring an Accountant from the Get-Go Can Become a Major Expense
Trust us. The decision not to hire an accountant will eventually become a “hidden cost.”
While you might decide to save the pennies and do the job yourself, you’ll realize this is anything but efficient over time.
One of the biggest traps that business owners can fall into is not hiring an accountant from the get-go. This may be due to budgetary constraints, but often it’s simply due to a lack of knowledge about what an accountant can do for you.
A good accountant can help you set up your business, ensure you are registered for VAT correctly, and help you stay compliant with HMRC. They can also advise you on the most tax-efficient way to structure your business and help with year-end accounts. Over the long term, they will save you money. But initially you will need to budget for the upfront cost.
The Costs of Insurance Can Sneak up on You
Insurance is another one of those unexpected costs. Whether it’s the professional indemnity you have never needed before or the cost of insuring your products, these small fees have probably never crossed your mind until now.
You took these things for granted during your days as a salaried employee. Unfortunately, the onus is now on you to sort these out and prepare your business accordingly.
There Is More Expense to Hiring Employees Than Their Salaries
If you’re starting a business and hiring from the start, don’t be fooled into thinking that your only expense from hiring people is a salary.
On the contrary, this couldn’t be further from the truth. You’ll also need to factor in Employers National Insurance Contributions, Statutory Sick Pay, holiday pay, and other benefits. And then there are pension requirements—which almost require a dissertation.
As you can see, the costs of hiring employees add up. Some companies will turn to an HR person or external company to manage this, but this will be another unbudgeted cost.
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Software Costs Can Add Up
Again, back in the days of being an employee, this was something you didn’t have to concern yourself with. Now, it’s crucial to your business.
Sure, some businesses will be able to get away with using free software, but for others, this just won’t be an option. It’s also worth seeing if you are allowed to use some supposedly free software for commercial purposes. This is another mistake often made by a new entrepreneur.
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