How to Save Money and Budget When Expanding Your Business
Every business expansion has its own challenges, but knowing how to plan for the unexpected can save you thousands and even keep your business afloat during the transition. Consider these pointers.
When it comes to new hires, an employee's salary and the cost of business cards are just some of the many expenses you should budget for, advises Bill Walls, founder and CEO of InTouch Marketing based in Southern California. “There are several hidden costs that can increase your expected expenses associated with the new hire,” he said. These include:
- Workers' compensation insurance
- Payroll taxes
- Furniture and equipment
- Software licenses
- Employee handbook and agreements
Even taking your employees out for lunch needs to be considered, Walls added. “When you look at these potential hidden costs individually, a few dollars here and there may seem manageable. Put them all together and you're looking at potentially a few thousand dollars you never even considered or budgeted for.”
Moving to a Commercial Space
Lisa Chu, owner of BlackNBianco, based in El Monte, California, said that she learned the hard way that there are sometimes hidden fees and up-front costs you need to consider when signing a commercial lease. What she did not expect when making the move from a home-based business to leasing a warehouse was a Common Area Maintenance, or CAM fee, which pays for the maintenance of common areas like hallways, washrooms and parking lots on the property. “Depending on your location, it can add $100 to $500 per month to your lease,” Chu said. “That adds up really quickly if you are on a shoestring budget.”
When leasing a commercial space, expect the landlord to charge you at least a two-month deposit in addition to the first month’s rent, advises Chu. There are also permits, licenses and other fees that may apply when making the move from home to a commercial space, including commercial liability insurance.
Expanding to a New Location
Lauren Watkins, owner of Urbana Custom Clothier, started out in Salt Lake City and expanded to Washington, DC last year. “I sure didn't hit the ground running exactly like I had imagined,” Watkins said, after encountering several unexpected costs she had to learn about the hard way, including the cost of networking events in her new community.
“You may have a couple of warm leads or a small clientele already in your new area, but that isn't enough to survive long term. People need to know you exist. There are a lot of free events, but I would recommend budgeting the entire first year for regular attendance at organizations ($15 to $30 per event) a couple of times a week," advises Watkins.
Keeping Personal Expenses in Check
When you own a small business, it's often just as important to keep your personal expenses down to a minimum as it is to manage the business expenses. If you use Quicken Home and Business 2017, you can do both at the same time.
When Watkins expanded to Washington, DC, she discovered the increased cost of living was an added expense she hadn't accounted for. “The dollar stretches a lot further in Salt Lake City than in DC,” she said. “My rent increased $500, my food bill tripled, and transportation costs spiked in areas I never took into account. If the cost of living increases, your income needs to as well. Start out modestly and expand your lifestyle at the same pace your company grows,” she advises.