As entrepreneurs and employees, we’re all familiar with our outgoings – tax, national insurance, business rates, equipment, travel, and so on. National Insurance was in the news earlier this year when Chancellor Phillip Hammond set out his first budget in March. He announced that National Insurance would increase to 11% for the self-employed, but then made a U-turn a week later scrapping the 2% rise.
This change of heart was good news for sole traders, but what others costs should you take into account if you’re setting up on your own? If you don’t think about all of the costs involved in running your business, you could be in for a shock when your profits aren’t as high as you are expecting. Here are a few costs that you may not have considered, but that should play a part in your business plan and accounting.
Patents
If your business is based on a great new product idea, part of your risk assessment in your business plan should be dedicated to how you are going to protect it. You may want to consider taking out a patent to ensure that other businesses cannot copy your creation. This can cost up to £280, and you’ll need to pay to renew it, too. Find out more here.
Insurance
Depending on the type of business you are running, you may need various kinds of insurance. Public liability insurance covers compensation claims made against you for injuries or property damage, so this is particularly important for shops and tradesmen. Professional indemnity insurance can protect you against claims made by clients if you make any mistakes that cause them a financial loss. This is known as business injury, and some professionals, such as accountants, are legally obliged to take out this type of policy.
Even if you’re working from home, you should consider what types of insurance you may need, such as contents or building insurance. If you have employees, you will need employers’ liability insurance, too. Insurance should form part of your risk assessment, so consider the risks that apply to your business and do your research to find out what types of insurance you may need. Factor the costs into your business plan.
Business Services
Even if you don’t have any employees, you may need to hire certain professionals to help you to run your business. For example, you may need an accountant to help you with the financial side of things, especially when your business starts to grow. If you’re a member of any professional bodies there may be an annual fee associated with this, so you should make sure you consider these costs when you’re writing your business plan.
Your Time
When you’re working alone, particularly as a consultant or freelancer, your time is precious. Remember, you’re only being paid for the time and effort you spend working for your customers. The time you spend on admin activities, accounts and so on, isn’t time you’re earning money for. So you need to think about this when you are writing your business plan – how is your time going to be spent, what could you outsource to other people or companies, and how long are you realistically going to be able to spend on billable activities? What impact will how you spend your time have on the cost of running your business?
Writing your business plan is another time draining activity that can take you away from your billable work. However, it’s an important part of getting your business off the ground, so don’t ignore it completely – ask the professionals for help. cbm can help you write your business plan so that no costs are left ignored, and there are no nasty surprises when it comes to looking at your accounts. Contact us online using the form on the right, or call 01604 420 420.