3 Overlooked Costs You Need To Plan For When Growing Your Small Business
Of the 30.2 million small businesses in the country, an overwhelming percentage of them have plans to grow their business in the next 1-5 years. Growth is a natural and expected part of the business life cycle, yet a common worry for small business owners remains the issue of accessing finance to fund their plans. In fact, if you are a business owner, studies have shown that you spend 17 full days worrying about your business outside of work, particularly when it comes to making enough money to break even or grow. When considering a business expansion and planning to purchase equipment, it helps to be aware of what’s to come, including those often-overlooked costs of taking your business to the next level. Knowing all the costs attached to your business growth plans can help you get in the habit of budgeting better and be prepared for what is to come.
The Administrative Side Of Financing Your Expansion
Businesses that want to grow rapidly often turn to external financing, including bank and credit union loans, credit cards or investor financing. While these sources come with the perks of quick access to the full amount needed to execute your plan (versus a gradual expansion), they also come with their own set of costs, including costs of preparing your application and the all-important interest rate. Small business loans average 4-6 percent interest rates from traditional lenders but can be dependent on lender policies, your credit rating, and whether it is a secured loan. For credit cards, a business credit card will cost you up to 18 percent, while the use of your personal credit card comes with an interest rate of 19 percent for new account users and 15.10 for existing users.
Then there are the costs leading up to your application. Most lenders or investors will ask to see business expansion and marketing plans, projections and past business performance reports before they make their decision. This entails hiring the services of business plan writers and an accountant.
The Costs Of Protecting Yourself And Your Expanding Assets
Taking your business to the next level may involve increasing your stock or production levels and the corresponding assets needed to facilitate this growth. This means additional employees, office and warehouse space, and additional equipment. With this, the value of your assets – and your vulnerability – rises.
This means it will be prudent to review your insurance policies and protect your business against the unknown. It may be the case of your current coverage not being enough to cover the value of your newly expanded business or the hiring of new employees requiring additional worker compensation and health insurance coverage. While it may be difficult to anticipate this at a planning stage, you could access small business insurance quotes using estimated values post-growth, and then use this figure as the base in your growth budget. It may not be exact, but it should get you close enough to the final costs.
The Cost Of Curating And Promoting Your New Image
It is not enough to invest in growing your business assets; you must also invest in attracting the consumers to this newly revamped brand. Whether it is more expenditure in marketing to drive sales to move increased levels of stocks, or collaborating with influencers to drive traffic to your new business website, you will need to spend money on administrative tasks to sustain your business growth. Therefore, you are possibly looking at an increased marketing budget, administrative labor, potential outsourcing and freelancing salaries, and higher transport costs.
At the end of the day, you want to head into your business expansion phase being as best prepared as you can be. Neglecting to properly anticipate all the costs attached to growing a business could essentially be the difference between success and failure.