The old adage is all too true—it takes money to make money. Whether you are just starting out or working to scale your business, you should be aware of the expenses involved. Here are three major expenses to be ready for as a business owner.
Insurance
Even with a small business, it is important to protect yourself. Small business insurance will protect you against unforeseen expenses that have the power to shut you down. You might want to research and consider purchasing some or all of the following insurance policies:
General Liability
General liability insurance can cover costs associated with lawsuits, property damage, and bodily injury.
Commercial Auto Insurance
This is important if you keep any company-owned vehicles.
Data Breach Insurance
Data breach insurance is helpful if you store your customer’s personal data. Data breach costs can be overwhelming without insurance.
Errors and Omissions Insurance
It is almost impossible to run a business without making costly mistakes at times. This form of insurance protects you from those unfortunate errors.
Business Income Insurance
This type of policy covers lost wages in the event that you are shut down for a time.
Commercial Property Insurance
Commercial property insurance protects your physical assets from loss, including damage and theft.
Product Development
There are a number of costs when it comes to product development. You will need to factor in the cost of materials, developer costs, prototype and testing costs, possible lawyer fees, and marketing costs. One way to reduce these costs is to outsource product development. Another way to reduce your costs is to get your product design right the first time. Constantly redesigning products can create waste for your business.
Labor
When it comes to business costs, labor is by far the priciest. Some experts believe that, on average, 70% of your operational costs will go toward labor. Because of this, you might be tempted to lowball your employees’ wages, but doing so can cost you more money in the long run. Replacing disgruntled team members, and training new ones, can be far more costly than retaining happy workers with good pay and other benefits. Before hiring, research the current market rates for similar jobs in your area. Once you know the going rates, offer competitive wages.
Even though running a business can be costly, a strategic business plan should cover your costs and rake in the profits. After all, that is what running a business is all about. And remember, labor, product development, and small business insurance are all necessary investments toward growing your business and watching it thrive.
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