Running a small business, as you probably already know, is a spectacularly difficult thing to do. It feels like90-hour days would not be enough to get everything done. The same goes for money – everywhere you look, you are hemorrhaging money and it feels nothing can stop the bleeding. And this is just the stuff you expect. Once you become an SMB owner, you soon find out that there are always novel, hidden costs of running a business.
These hidden costs are our subject today.
I Am Paying My Employees How Much?
When many SMB owners think about how much they are paying their employees, they tend to only think in terms of annual salary. In reality, their salary makes only a part of the money you will spend on them. It is still the largest part, but only a part nonetheless. Most experts agree that you actually pay somewhere between 1.25 and 1.4 times their basic pay. Where does this other money go? It goes on taxes, workers’ comp and benefits such as health insurance, auto insurance, retirement benefits and so on. All of this adds up, times the number of employees so make sure to compare quotes to find the best rates!
You get the picture.
Replacing your Employees
You will spend even more if someone leaves you, and they will, especially these days when leaving one’s company is once again in vogue, so to say. If you have to let them go, you will often have to give them a severance package, on top of the money you will be spending on their replacement. If they decide to leave you, there is a chance you will see your unemployment insurance increasef course, there is also the search for a new employee and the costs of their onboarding process where you need to give them time before they can perform as well as the employee who left you. If you need to provide them with training, this will cost you even more.
Permits, Taxes, Benefits, Licenses and Legal
Yes, it is a stretch to call taxes a hidden cost, but we had to include them because you have absolutely no idea how many different taxes, benefits, licenses and legal fees you will be covering as a small business owner.
Since tax requirements will differ a lot depending on the type of your company, the country (state) you are in, the industry and innumerable other factors, we simply do not have the time to cover them all. Let’s just say that you will be spending quite a bit of money on taxes. Worker’s benefits also add up.
Once again, depending on your industry, you will be needing quite a few licenses, in many cases involving some type of surety bond too (licensed and bonded). Legal expenses also pile up, even if you are not being sued left and right. There is always work for an attorney at an SMB and guess how much that work costs?
Mistakes, Repairs and Missing Stuff
One of the most annoying lessons SMB owners learn after a while is that things go wrong all the time. All the time. People make both small and huge mistakes and that is just the way things are. An accounting mistake can result in tax people harassing you for weeks on end, hurting your business. A legal mistake can cost you thousands in litigation. A customer service mistake can cost you a paying customer.
Equipment also breaks down and there is no one to replace it by you. In case you run a business where you manufacture something or have to deal with something more comprehensive than a few computers, you can rest assured you will be spending even more on repairs and maintenance.
Then, there is the issue missing stuff, i.e. company property that gets misplaced without you ever finding out how exactly it got misplaced and where it went. Yes, this happens. Do not be fooled. All of this stuff needs to get replaced.
The Importance of Being Zen
The most important thing, aside from learning about these costs, is to stay Zen in face of them. No one forced you to become a small business owner. It is the way the universe works. Prepare for these costs. Plan for them.
Never despair.
