Many people start a business because it’s a lifelong dream, or a passion; some do it because they’re desperate to make money.
Whatever your reasons for becoming your own boss, just remember the old saying that it takes money to make money, and that’s never been truer than when you’re starting your own business. It sounds romantic to think of yourself going from rags to riches, but most businesses need to start off with a little of the green stuff.
In other words, when you’re drafting your business plan, don’t forget about these hidden costs (and probably a million more that aren’t listed). Knowing what expenses are coming could help you not only start your business but ensure you stay in business.
1. Business insurance.
If you’re just starting out, you may well not need business insurance. But it’s something you’ll want to consider early on. For instance, if you have a lot of inventory in your garage, and a fire taking it out before you sell it would financially devastate you, there’s a good reason to get property insurance. If there’s any risk of being sued by a customer, you probably want liability insurance.
But you’ll want to consult an insurance expert because there are a lot of different types of business insurance, and not all policies will be practical or necessary for many startups.
Rob Marsh, a Salt Lake City resident who started his business, Logomaker.com, in 2010, knew before he started his website, which allows people to design their own logos, that he would buy business insurance.
He wasn’t concerned about that, but Marsh says, “because my business runs online, I also had to secure insurance to protect against data breaches and online security issues.”
Marsh planned to spend $1,000, and he says that was pretty accurate. “The cost of worker’s comp and basic business insurance was just under $900 a year. But coverage for the risks associated with a data breach were far more expensive than I thought. That was a surprise.”
He ended up spending $5,000 a year for what’s sometimes called cyber insurance. “Given the expense, I wouldn’t surprise me if many online business owners skip this kind of protection and simply hope nothing bad happens,” he says.
Source: U.S. News & World Report |