Everyone has that dream business in their head. The idea of working for ourselves is the ultimate American dream. Many people take the leap and go into business on their own. They usually try to make money selling something they love. It’s always a disappointment to realize that you are going out of business within a year. Why does that happen so often? People don’t plan. They forget that part of owning a business is paying the business’s bills, so figure in business expenses before you open for the first time.
Do the research. How much can you expect to pay in utilities? Communication costs must be applied. There may be a payroll, and that is more than the wage. You also have to figure in payroll taxes. No business runs without a product, and you’ll have to buy what you’re going to sell. There’s business liability insurance, and if you buy your building, there’s insurance on that, too. You need to have an advertising budget. There are very few successful businesses that don’t advertise. There will be incidental business expenses, too. For instance, do you have money designated for plumbing emergencies? Office supplies will be needed. You may need to pay credit card fees. Also business bank accounts are not free. There will charges there, too.
It may not be a business expense, but you have to figure in the rainy day, too. Sometimes, sales are just slow, and you may not be bringing in the revenue it will take to pay the bills. In that case, you’ll need an emergency reserve. Now the concept of owning a business is a reality that you need to think long and hard about before you start.