6 Hidden SME Business Costs: Expecting the Unexpected
Even the most robust business plan can unravel if you don’t think about the hidden costs of running a company. While there are ways to reduce what you spend on things you can predict, small business costs that come out of the blue can have a huge impact.
According to the Office of National Statistics, cash flow is a key reason why up to 90% of SMEs go out of business. So, it’s important that yours is ready to expect the unexpected – and stop hidden business costs from creating a hole in your finances.
Here are 6 of the hidden costs that it’s worth considering when writing your business plan:
One of the business start-up costs you can map out with relative confidence is how much you need to pay your staff. But do you know that hiring and firing can be a drain on your time and money?
It can be a real issue if you’re among the 20% of UK SMEs with high staff turnover. One study found the cost of replacing someone on an “average salary” is £26,595 – based on the cost of recruitment and reduced output while getting a new employee up to speed.
A quick, but thorough recruitment process can help reduce these costs, but it’s also well worth thinking about the ways you can retain employees and reduce staff turnover.
In smaller businesses where it can often be all hands to the pump, staff productivity has a huge impact. But Leesman research found that just 57% of employees globally “agree that their workplaces enable them to work productively”.
Are you dealing with loads of emails? Is the phone ringing all day? Do you have back-to-back meetings in the diary? There are many things that can affect employee output, but all of them can have a negative impact on the cost of running a business.
Failing to deliver
If you sell products online, delivery will be one of your main business costs. It’s possible to factor these costs in when writing a business plan by looking at all the options open to you. But have you thought about the flip side and the cost of getting deliveries wrong?
The 2018 IMRG Valuing Home Delivery Review 2018 found UK retailers lose £1.2bn each year as a result of failed, late or lost deliveries. The latter can leave a major hole in your small business finances – costing an average of £123 if a delivery goes missing.
That’s why it can be vital to partner with a trusted parcel delivery specialist to make sure your products get to where they need to be on time, every time.
Not being paid on time is a significant concern for many UK small businesses. According to the Federation of Small Businesses (FSB), 37% have run into cashflow problems as a result – with small businesses owed £6,000 on average, mostly by larger companies.
Such is the impact of late payments on smaller companies that the FSB believes 50,000 more could stay in business each year if all due payments were made on time. To help deal with the problem, the government has unveiled a set of new proposals to support SMEs.
The introduction of the General Data Protection Regulation (GDPR) in May 2018 makes it more crucial than ever for small businesses to keep employees’ and customers’ personal data secure.
You may need to pay a data protection fee, while FSB research reveals the average cost of being GDPR-compliant to be £1,030 per business. If your business is not exempt from the data protection fee and you haven’t paid it, you could be fined £4,350.
There are different types of insurance that can add to small business costs – depending on whether you need them or not. The only one you must have if you employ staff in a paid or volunteer capacity is employers’ liability insurance.
Not having this could lead to a fine of £2,500 for every day you’re not properly insured.
You might also need to think about contents, professional indemnity, product liability or public liability insurance costs for small businesses. How much getting insurance adds to your business costs will come down to several different factors.
As the owner of a smaller business, you’ll know how soon the cost of running a business can stack up. But preparing for these common hidden business costs can help you avoid any nasty shocks that take precious time and money out of your company.
Image(s) courtesy of iStock.
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