How much money does your business need to grow? The answer is probably more than you think. It’s important to take more than the large, upfront costs into consideration. In this blog, we’ll review different growth scenarios and some associated costs you may not have included in your budget.
Opening a new location
If you’re opening a new location, you’ve probably planned for major costs such as a deposit and rent or a mortgage. You may have also considered licences, business rates, and insurance. But have you included council charges, legal fees, and utility bills? These can be costly depending on your location.
You’ll probably need furniture, equipment, signage, window displays, and décor – all of which can add up quickly. If you need to renovate the property or install stock room, you can anticipate dedicating a significant portion of your budget to these expenses. To keep your new location safe, you will need some kind of security – whether that’s a lock and key or a 24-hour security guard is up to you.
When planning to open a new or additional location for your business, it’s important to consider more than just the basic cost of the premises and add a percentage of your budget as a contingency fund.
Hiring new staff
Employing staff can be an expensive and time-consuming process. While using a recruiter can reduce the time you spend searching for staff, you will incur fees for using their services. If you prefer to hire employees yourself, you may have to pay for advertising costs. In addition to paying staff wages/salaries, you will need to pay employer’s National Insurance, pension contributions, and possibly holiday and sickness pay. If you don’t already have them, you may need employee liability insurance and a payroll system. Employee training, bonuses, and expenses can factor into your overall budgeting as well. You may be able to reduce some of these costs by using part-time staff and contractors, but if they are short-term solutions, you may have to repeat the hiring process again in the future.
Improving products and services, or creating new ones
Improving your products or offering new ones is a great way to grow your business. Research and development can be expensive, especially if you are improving or creating a line of products. So can supplier and manufacturer costs, product testing, and marketing. If you file a patent for your new product, the online application is relatively inexpensive at £230, but this can increase to thousands of pounds if you use a patent lawyer.
Purchasing additional stock
If you’re planning to increase sales of your current products, you will inevitably need to invest in purchasing more stock. While you may have considered the price of the stock, have you also considered the cost of shipping it, storing it, and managing it? If you’ve been handling your stock management manually until now, you may need to use a stock management tool in order to track your it more precisely.
When increasing your sales activity, it’s important to have enough inventory to fill your orders – if you don’t, your customers could walk away empty-handed or choose not to wait for items to be restocked.
Financing your growth strategy
Understanding your cash flow is crucial to planning for your business’s growth. By analysing the direct and indirect costs of your plans, you can create a strong estimate of how much money you will need to invest in order to succeed. Don’t underestimate your finance needs; if you aren’t careful, your growth ambitions could quickly become unaffordable. Start planning for now by defining your long-term goals and raising finance in advance. Growing your business without additional funding could put stress on the business, potentially harming your company over time. Failing to account for all of the expenses associated with growth can be a costly mistake.