Small business owners are a vital cog in economic growth. When the global recession hit, small businesses created 60% of the new jobs between 2009 and 2013. And one of the major complaints from small business owners is that they didn’t realize the amount of hidden costs they would endure.
Running a business is costly, and the most commonly overlooked costs of operating a small business are:
1. Processing and Credit Card Fees
Payment processors also need to make their money. When a credit card processor wants to make money, they apply a fee to every charge that they process. This is why you’ll find many restaurants and gas stations stating that they apply a certain percentage on to the cost of a bill when a credit or debit card is used as payment.
These fees can be as much as 3%, so small business owners must adjust their prices accordingly to make a profit.
2. Credit and Loan Fees
Small businesses that need capital quickly can take out a loan or apply for a credit card. These avenues are a must for most businesses, and while they work very well to obtain quick capital, there’s also an issue that’s overlooked: fees.
The fees attached to any cash flow credit or loan include:
- Late payments
Reliance on these accounts will cut down on a business’s bottom line, making it more difficult to maintain proper capital levels.
3. Property Taxes
Property, or real property, taxes are a major expense, and these taxes often rise as the city or state needs more funding. It’s not uncommon for a yearly or bi-yearly assessment to be made on property taxes.
Businesses that own a commercial structure must pay taxes, and as rates rise, businesses can also expect lease rates to rise.
“Review the value of your property in the marketplace to ensure that the assessment is not excessive. This will include an analysis of comparable sales as well as rents in comparable leased storefronts and retail space,” states the Law Offices of Gary H Smith, P.C..
You can fight higher-than-normal rates, but you’ll still be required to pay property taxes every year.
4. Shrinkage Costs
Shrinkage costs are common in retail businesses. These costs are as high as 1.4% of a company’s total sales. Fortune claims that businesses lose $32 billion in shrinkage annually. What is shrinkage? This is a term used to describe inventory loss.
Loss occurs between the time a business buys the product from the supplier and the time it’s sold to a customer.
There are many reasons for shrinkage:
- Vendor errors
- Short shipments
- Damaged goods
- Customers receiving excess items
Shrinkage costs will reduce a company’s bottom line and need to be properly accounted for in every business.
5. Insurance Premiums
Small business owners should discuss their insurance needs with a professional. Why? It’s easy to overlook the required insurances of a business. You have an obligation to carry all of the proper insurance.
If you fail to meet this obligation, it can lead to hefty fines or liability.
You can save money on insurance by bundling policies together in one package or trying to negotiate with an insurance provider.