7 Common Expenses For Small Businesses

If you’re a small fledgling company, you’re probably worried about all the investments and expenses in the next few months. Truth be told, most companies go out of business in the first few years, so reducing these costs is crucial for your survival.

Sometimes, owners forget about the basic costs of doing business. As you’re thinking about inventory, manufacturing, and all these other stuff, you might completely forget about minor expenses such as commercial cleaning services. So, when the end of the month comes around, young entrepreneurs are often surprised by all the things they have to pay for.

In this article, I will go through 7 common expenses for small businesses that affect almost any company regardless of its size.

IMAGE: UNSPLASH

1. Rent

Most companies don’t have their own office space. Instead, they need to rent. Now, depending on the type of service you’re providing, the rent costs can be quite high. This is especially true for businesses that depend on the location to make money.

The important thing to consider is the length of the contract. Some of them can last for years, potentially exceeding the life cycle of a company. Ideally, you should try to sign a shorter lease, so you don’t have to worry about that.

2. Insurance

Business insurance is another big thing on your list. Luckily, it is an expense that you can deduct from taxes. Aside from paying for dental, life, and vision insurance, you also have to protect all the business equipment. This also includes building and furniture insurance.

On top of that, business owners should consider things such as liability coverage, compensations, insurance for potential shutdowns, etc. If you have a good accountant, most of these costs could be deducted. Then again, this might also vary based on the number of employees, the quality of insurance, and a few other factors.

3. Utilities

No matter what kind of office or selling space you’re using, you need to consider utility bills for electricity, heating, and water. Depending on the type of contract you’ve signed, these payments could be included with the lease.

The good thing about utilities is that you can deduct them from your taxes. They are classified as ordinary expenses by the tax institutions. Generally speaking, utilities are easy to calculate, and you will always know how much money you need to set aside for these payments.

4. Salaries for employees

Salaries and benefits are almost always the highest cost a company can incur. Although micro companies don’t have to worry about this expense, especially if you’re employing family members, everyone else has to.

If you don’t need a permanent employee, you can always hire someone on a salary. Of course, this depends on the business you’re running and whether you need a person to work around the clock. Keep in mind that part-time employees’ salaries and benefits are considered tax deductibles, so that’s something you can save money on.

5. Marketing

No matter how much you invest in marketing, it is never enough. It is one of those expenses that you can easily control and reduce, but you would always like to increase (even if you have the resources).

Depending on the type of business, you might have different preferences for the optimal marketing channel. Nowadays, most companies focus on digital marketing, but you might also consider some traditional marketing channels such as billboards, radio ads, and such.

6. Taxes

Of course, taxes should be one of your priorities. Even if you don’t have money for other things, you need to pay the IRS. If you just started out, you should definitely inquire about subventions and other benefits that can alleviate the impact of taxes.

Like most other things on the list, the expense can vary based on several things, such as your industry and state laws. So, you might have to consider fuel tax, excise tax, payroll tax, sales tax, state income tax, property tax, and self-employment tax. Calculating taxes for small companies is usually easier compared to medium and large companies, but it can still be tricky due to all the things you need to consider.

7. Equipment and tools

No matter which business you’re in, you will probably have to buy several computers. A small business owner also needs to consider other things such as desks, chairs, and other furniture. Of course, you will need to set aside some resources for purchasing office material.

Equipment and material are relatively easy to calculate. Unless you had a large mishap and a piece of furniture got completely demolished, it is easy to predict these costs.