If you’re planning on going into business for yourself, you probably already know it will cost a lot. What you may not realize is just how much.
According to the AARP, the average cost of starting up a business is around $30,000. That’s a lot of investment for something that has a high potential for failure. Statistics show that 80% of new businesses fail before they reach their tenth year.
If you are committed to starting your own business, be smart about it. Put your money where it will serve you best by investing in these five critical areas.
If you want people to buy from you, they have to be able to find you. They can’t find you if they don’t know you exist. Marketing and advertising are how you get the word out about your business and showcase your products and services. It’s also an essential early investment if you want your business to grow.
While you can certainly try to market everything yourself and succeed, it’s a risk. Marketing has evolved into such a specialized area that not just anyone can do it. You may want to consider outsourcing your marketing to experts who specialize in different areas of marketing, including:
2. Equipment and Supplies
No matter what sort of business you launch, you’re going to need supplies. Smaller work-from-home businesses won’t need as much as a brick and mortar shop, but everybody needs pencils, paper, staples, computers, Internet access, and more. If you want to open up shop in a more specialized industry, such as construction, you’ll need even more.
You can’t underestimate how much this costs. Money Crashers reported that the average new business needs anywhere from $10,000 to $125,000 in supplies in equipment. Though they’re essential to get your doors open, make sure your cost predictions are accurate for purchasing equipment, and take your time shopping vendors. You might blow more money than you need to on overpriced goods.
3. Insurance Coverage
It’s probably going to be your least favorite aspect of running a business, but nevertheless, you’re going to need insurance coverage. There’s a lot of different providers in the market, and you’ll have to choose the one you feel best suits your needs. No matter which provider you choose, or what business you have, there are three key coverages you need.
Professional Liability Insurance (PLI)
This type of coverage will protect you against loss in the event that you are sued by a client for a mistake you made. For example – if you started an insurance company, and claimed that policy would cover a certain catastrophe, but it didn’t, the client could sue you and most likely win. PLI would cover part of the settlement that resulted from your mistake.
Worker’s Compensation Insurance
Whether you plan on having just one employee or many, you have to have “workman’s comp.” This type of insurance covers medical care, disability, and any benefits upon death if an employee is hurt or dies while performing their duties.
This is critical in high-risk industries like construction or electric maintenance, but every type of businesses needs it. Even as a doctor, if you get injured on the job, you might find yourself out of work for a long time. Disability coverage will be essential to help you pay your expenses while you recover.
Business Interruption Insurance
This type of coverage protects you from a loss in the event that a catastrophe prevents your business from operating. For example, if you had to shut down for a few weeks because of a fire, business interruption insurance would cover some or all of your lost income. Bear in mind – it won’t pay to replace any damaged equipment from a disaster, just the lost income.
4. Technological Costs
Technological costs refer to any digital assets you need to get your business up and running. Examples of technological costs can include setting up a website, paying a graphic designer to create a logo, buying the software you need to conduct payroll, etc. No matter what type of business you start, you’re going to have some associated technological costs.
The nice thing about tech costs is that they don’t feel like such an expense. You know you want and need these technologies to make your business thrive. Plus, compared to other big costs like renting office space and paying insurance premiums, tech costs usually aren’t that expensive.
5. Employee Expenses
If you want to grow, you’re going to need a great team to help you. It’s always a worthy investment to bring in good, hard-working people, but it can cost quite a bit. Areas, where you have to spend on your labor force, can include:
- Wages and salaries
- Benefits and bonuses
- New equipment
- Training and education
Even if you start off with just a few people, forecast where and when you want to grow your team. Start saving money now so that you have plenty of funds available to bring in new employees when the time comes.