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Hidden Costs You Don’t Think About When Going Into and Running a Business

Setting up and running your own business isn’t easy. It’s incredibly challenging and time-consuming but also one of the most rewarding pursuits if done right. The opportunity to provide jobs to our community while also earning a profit is every entrepreneur’s dream.

Great businesses start with solid business plans that consider a number of factors. These factors can include your market, profitability, and possible competition. It doesn’t always take just a business degree to understand these factors, though. It takes the right combination of creativity and experience to go into the market.

Some hidden factors usually aren’t as prominently discussed in the beginning stages of businesses. These often come up in actual service or production, and it’s often too late to address properly. While these hidden costs may seem inconsequential in the beginning and when considered individually, they add up over time. This can significantly affect your cash flow and capital recovery plans. Some industries can be more forgiving than others when it comes to giving you time to adapt to them adequately.

The best practice would still be to go into business with almost everything ironed out. Sure, you’re not going to be able to anticipate every scenario. Still, you can take a closer look into other factors that could affect the industry and business you’ve chosen. Here are just some examples of hidden factors you should take into consideration starting your business.

Hidden costs associated with your location

You could have the brightest business idea, employ the best and the brightest, and invest in the best equipment, but if you’ve poorly considered your location, then it’s going to affect your bottom line. Location doesn’t just mean your target market and competition. It also means available means of transportation to get to your establishment, not just for the customers but also for your workers.

Foot traffic is an often considered factor when scouting locations, but great foot traffic doesn’t always translate to success. The skill base in the area is also something that affects your possible workforce. If public transportation in the area isn’t that great, then chances are you’re going to be employing locals. Does the community have the needed skill base or education you need from your employees? Great locations will allow you to have a balance between these factors that still maximizes profitability.

Location costs also involve deciding whether you want to lease or build a structure. Overhead costs like rent in districts with poor rent control but offer you a great market may not be worth the trade-off. Businesses that have longer capital recovery plans may want to consider investing in their own structures. Other environmental factors should also be taken into consideration when discussing locations.

Weather conditions and natural calamities to be expected in the area are factors that significantly affect your business at a moment’s notice. Suppose you chose to build your own structure. In that case, stormwater pollution prevention plans or long-term SWPPP inspections are necessary to consider weather conditions if you’ve selected a location with frequent rain.

Hidden costs associated with your workforce

Common factors taken into consideration when it comes to workforce expenses are salaries and health benefits. These two are definitely significant factors, but your hiring process or staff would be another one to consider. Great workers are developed over time. Creating an excellent hiring process and investing in a great head hunter can save you from high employee attrition rates. Investing in your people can lead to excellent skill development and longevity. Constantly switching out employees causes more extended training periods and, in most cases, poor production results.

Don’t limit yourself to short-term solutions when it comes to the human elements of your business. Great employees can also aid in preventing other costs associated with your workforce, like shrinkage. Opportunities for employee theft and vendor fraud are predominantly present in FMCG’s or fast-moving consumer goods industries. Excellent relationships with your vendors and discerning which people you’d like to employ considerably minimize this risk.

There are other factors like salary increases, career development, and performance bonuses to take into consideration for your workforce. These efforts go hand in hand with developing your workforce to last long term. The company’s organizational structure should be structured to allow a clear path for growth and development. Financial incentives are also a big part of keeping your employees happy. However, this may not be present in all industries. It is quickly becoming one of the most effective ways to motivate your workforce better.

These are only some factors to take into consideration when it comes to choosing your location and workforce. There are a whole host of other factors that come into play when starting a business. The key is to take it one step at a time and make sure to look at the bigger picture. Though quick capital recovery is still a goal for the majority, it’s by no means the end all be all in the business world.

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