Six Unexpected Expenses Some Start-Up Business Owners Fail to Anticipate
in Cash Flow & Forecasting on August 9, 2019
Set up your new small business for success by doing your research, planning for financial “surprises” and being proactive with your small business’ finances.
Fact: According to the Small Business Administration, half of all new businesses in the US fail within the first five years.
That’s a sobering statistic. But the great news is that half of all new businesses in the US survive and thrive within the first five years. How do you make sure your small business falls into the latter category? You do so by creating a cash flow budget, practicing good cash flow management and engaging in financial forecasting. You need to take the time to analyze and understand your revenue and expenses, and do your research to ensure you have a thorough and complete picture of your business’ expenses.
Whether you’ve been in business for two months or two years, positive cash flow is crucial to keeping your small business afloat. The best way to keep positive cash flow is to be prepared for expenses that might arise that are outside of your budget or plan. In other words, expect the unexpected. Be proactive. Build a cushion into your operating capital budget so you’ll be prepared when these types of expenses crop up. Then you can focus on running and growing your business.
Every small business owner should consider these six unexpected expenses:
- Insurance. Depending on the nature of your business, there are several types of insurance you’ll need. Liability insurance is a minimum, whether it’s general liability, product liability or professional liability. If you have a brick and mortar operation, you’ll also need commercial property insurance. If you have employees, you’ll need workers’ compensation insurance. You might also consider business income insurance, which helps protect your income if you experience a business interruption, such as fire or theft. And as the value of your business grows, you will need to continue to increase your coverage to keep pace with it.
- Utilities. As you were creating your operating budget, you considered the cost of renting or buying your business’ facility. However, many business owners underestimate the costs of everything else that goes along with a brick and mortar space: electricity, heat and air conditioning, phone, internet service, water and trash removal. Do your research on what each of these items will truly cost if they apply to your business (or might in the future) and account for them in your operating budget.
- Taxes. Consider federal, state and municipal taxes as you’re building your operating budget. In addition to employment and income taxes, you’ll be responsible for property taxes on both real estate and other business property, such as equipment and furnishings. And, just as is true with insurance, as your business grows, your tax liability will increase. Be sure you’re adjusting this expense down the line.
- Emergency repairs. Equipment breaks down. Employees break things. You need to be able to repair or replace crucial items in a timely manner without disrupting the operations of your business (or being in a position where you need to “borrow” money from another area of the business to keep things up and running).
- Professional fees. You’re an expert in your field, and you will most likely need the consultative services of others who are experts in their fields to guide you. Unless you’re an accountant or a lawyer, you need to build the projected expenses for both into your operating budget. While you might not need an attorney on retainer, you should ensure that your business structure is sound and your employee and client agreements adequately protect you.
- Marketing. You can’t assume that, if you build it, they will come. You can have the most revolutionary or extraordinary product or service on the market, but without brand awareness, sales will likely be slow. Consult with a marketing professional to determine a marketing budget that will move the needle for your sales, and build that amount into your monthly expenses.
Get a handle on it
Owning a small business can be rewarding and fun. It can also be overwhelming and stressful. The best way to minimize your stress is to have a solid handle on your business’ financial picture. Continue to tweak your operating budget to include potential expenses, and expect the unexpected. Find a financial forecasting tool that has the features you need to get a clearer picture of where you’re heading.
And then go for it.
FuelGauge is a simple, easy-to-use, cloud-based cash forecasting software created BY a small business owner, FOR small business owners. FuelGauge is an affordable business planning tool with nimble drag-and-drop functionality and straight-up awesome customer support that helps you tame the chaos of projects starting, stopping and starting again, as projects often do.
If you’re ready for a new way to gauge your business, plan with confidence and achieve the goals you’ve set for your small business, get the power of FuelGauge today, with a FREE 45-day trial. You don’t even have to provide a credit card number. If, after 45 days, FuelGauge hasn’t rocked your world, you can simply walk away. With FuelGauge, you’ll have your past, present and future revenues and expenses at your fingertips, anytime of the day or night.