This post originally appeared on startupnation.com/grow-your-business
The budget is one of the most important components of your startup’s business plan. An in-depth knowledge of your cash flow and expenses will allow you to make more informed decisions and manage your business more effectively.
But, the only way your budget can help you is if it’s realistic. A good budget will include a comprehensive list of all expenses associated with starting and managing your business. If you are a new entrepreneur, or even a veteran entrepreneur breaking into a new industry, creating this list can be an enormous challenge.
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Here are five expenses that, if not initially included, can demolish your carefully-crafted startup budget.
Insurance
When you’re in the early phases of crafting a business plan, your first thought likely isn’t about the many things that could go wrong. However, regardless of your industry, it is imperative that you purchase business insurance. This not only protects you and your future employees, but can also provide financial protection that can keep your business afloat in the face of a crisis.
Depending on your location—or at least, the location where you will be filing taxes—there are usually legal requirements for business insurance. Once you’ve learned what types of insurance are mandatory, you can research what additional types of insurance would benefit your startup. This might include professional or product liability insurance, property insurance or home-based business insurance. When deciding what insurance you need beyond the legal requirement, think about your business’s risk factors, such as the susceptibility to natural disasters or fraud. This will help guide you in purchasing additional insurance policies.
The next step is to shop around and get quotes from different insurance providers. This is the only way to get a ballpark figure for the “Insurance Costs” section of your budget, which can vary widely.
Related: 10 Tax Deductions Every Startup Should Know About
Taxes
Your first tax filing experience after launching your startup is going to be a whirlwind challenge—one that is best done with the help of experts. Self-employment tax is a large, new component of tax filing that shocks many new business owners who have been traditionally employed in the past. While many of your startup costs can be written off in the first year, there are several purchases that might not qualify. Long before you start to file your business’s first tax return, it’s important to identify what will be a write-off and what won’t. This way, you’ll know how taxes are going to impact your startup budget.
Corporate taxes can be confusing even if you’re a single-person entity, so you’ll probably need to hire someone to help you complete your taxes. Add the fees for an accountant into your budget, too.
Software and apps
There are so many fantastic automated services to help you handle your business – from balancing your books to managing your inventory. You’ll not only want these things, because they make your life easier, but as a busy entrepreneur, you will need them. Automated software can dramatically increase productivity and help you get ahead of the game.
This is a component of the budget that will be very specific to your circumstances. While there’s some software that can help almost any startup (Quickbooks is a great example), your industry and niche will dictate most of the software you will need to purchase.
Try to anticipate your organizational and automation needs over the course of the first year or two. Once you find software that can help businesses like yours, plug the associated expenses into your startup budget. Provide a little buffer, too, as you’re likely to discover new software as you delve more deeply into your new business.
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Market research
Market research is an early step in your startup’s development that can dramatically influence your success. Market research allows you to gain valuable information about where your startup will fit in the business world—information like who needs your product, what they need from your product and how you can best market it.
That said, market research can be expensive. It’s an important cost to build into your startup budget. Working with an agency is perhaps the most expensive way to go about your market research, but you also reap the benefits of working with experienced professionals who know how to run focus groups and develop surveys. Many market research services can start at around $5,000. While there are cheaper ways to collect data, it’s likely there will be an associated fee for any valuable information you collect during your market research.
While doing research about market research sounds a little excessive, that’s exactly what you’ll need to do. Find out what data you need, how you plan to conduct your market research and how much that research will cost you. Now you have a solid number for your budget.
Use your resources
Creating a budget for your startup is no small feat. If you are new to business planning, it can seem overwhelming. Luckily, there are plenty of resources to help you. Remember to budget conservatively, as your expense and cash flow predictions will rarely be exact. Give your startup budget the time and focus it deserves, because a well-crafted budget can be one of the greatest tools for your success.
The post Don’t Let These 5 Sneaky Startup Expenses Break Your Budget appeared first on StartupNation.
