Getting into business involves calculating all expected costs. Doing so lets you know how much you need to charge for your products and services to break even and make a profit. Most business owners factor in all the main ones, like wages, taxes, insurance, and rent. However, it can be easy to forget unexpected and even surprising ones that can eat into your bottom line.
When you haven’t accounted for one-off and irregular costs, you risk not having enough money set aside to cover them. If you want to minimize the shock of those surprising costs, it’s worth knowing what they are. We’ve included some of the most unexpected ones below.
Health and Safety Maintenance
All businesses are expected to follow health and safety protocols to keep their teams safe. When you have a safe workplace, you don’t expect any out-of-the-ordinary costs to arise. However, there can be many health and safety maintenance-related costs.
Think about the average cost of recharging a fire extinguisher or servicing your sprinkler system. There can even be costs associated with printing health and safety manuals, topping up first aid kits, and sending your employees for first aid training. These costs can all add up. By knowing what they are, you can set aside funds in your operating budget to manage them.
Equipment Maintenance, Repairs, and Replacement
When equipment crucial to your daily operations has never let you down before, you might assume it never will. However, nothing lasts forever. Machine components can wear out, even with regular servicing, and entire machines can fail.
Receiving a bill can be a shock if you haven’t factored equipment maintenance, repairs, and replacement into your operating budget. Some machines can cost thousands of dollars to repair and even more to replace.
You might consider setting aside money for emergency scenarios like this. However, you might also be able to enter into a contract with a machine provider. Some suppliers only require a monthly fee in exchange for complete care of your machines for their lifetime.
Vendor Cost Increases
You know how much your raw materials and products cost to buy. With this information, you can add a carefully calculated margin before selling them to the general public. The margin you make can be used for all operating costs and take-home profit.
This seamless system can be thrown on its head when a major vendor increases their costs. Suddenly, your profit margin is smaller, and you have less spare money for everyday expenses and enjoyment.
You can never predict a vendor price increase, but history tells us that costs increase with time and inflation. This knowledge might mean you plan accordingly, like being ready to pass on your price increases to your customers.
Wage Increases
As of 2023, covered non-exempt workers who don’t work for tips must receive a minimum of $7.25 per hour as per federal law. That minimum wage can be higher or lower depending on where you live. For example, the basic minimum rate in Maine is $13.80, while it’s just $5.15 in Georgia.
You might set aside that base wage for your employees each week, but that doesn’t mean your wage budget will always be enough. You might negotiate wage increases with employees to keep up with inflation or promote them to take on more responsibilities. In such situations, there can be a shortfall between what you’ve set aside and your outgoings.
Always set aside more for employee costs than you expect to pay. That way, you can have a buffer for any employee-related costs like wage increases, training and development, and increased benefit costs.
Rent Increases
Rent is a main cost for most businesses. In fact, the average monthly asking rent for retail spaces in the United States is at an all-time high, totaling $22.95 per square foot. You might already be spending a great deal of your earnings on rent, but there’s a chance you might be spending even more in the future.
If your landlord decides to raise your rent and associated property costs, you’ll need to have more funds in your budget to cover the difference. It can often be worth setting aside more than your base rent cost to allow for such unexpected increases.
There are already many costs associated with running a business, but that doesn’t mean you’re aware of all of them. However, if you can anticipate some of these surprising costs above, you might be better positioned to take them in your stride without them affecting your business success.
