The new millennium and the proliferation of internet-based business as well as changing public attitudes have seen a boom in new business startups. The past two decades have given us Facebook, Airbnb, and Uber to name a few.
Funding for startups quite often comes from venture capitalists and crowdfunding sources such as Kickstarter, Go Fund Me, and Indiegogo, and securing finances can be a challenge that requires careful planning in how funds are used.
While startups may differ from traditional businesses in the way they begin, function and are operated, they usually still face the same basic expenses associated with running an operation of any kind:
- Office and equipment
- Insurance and legal
Office space and necessary tools and/or equipment is essential before your startup can even begin while utilities are a necessity for day to day operations and staff members. Many startups have found themselves in hot water by not securing licensing which could have been helped with a good legal department.
Securing essential inventory and employees are the most vital part of any business and a solid marketing effort needs to be made or nobody will even know you are there.
Costs and requirements
Most businesses require suitable premises in order to function and finding the right one can be a challenge while getting hold of any required specialist equipment can be costly if not handled properly. Considerations such as the size, requirements, and suitability must be carefully planned and the first site you visit may not be the best for you. Be sure to shop around for variable leasing prices and don’t be afraid to haggle about the lease expense as most property owners tend to start high anyway in order to maximize profit.
Office space might not be the only factor in your required premises and manufacturing or industrial specifications might also be needed. If this is the case then consider the equipment that needs to be housed as well:
- Is there enough space?
- Is the shop floor health and safety secure?
- Is there sufficient access to required utilities?
It isn’t uncommon for operations to commence in a combined office and manufacturing site where strict policies must be enforced when confidentiality is a concern and the exposure of your manufacturing IP processes needs to be kept to a minimum. Insider leaks, corporate espionage, and antitrust are very real and prevalent threats to any business so security also needs to be considered.
You may need to ensure that the site has a working CCTV system at the very least but more advanced security technology such as biometrics, full-body scanners, and restricted access areas provide legitimate protection for modern day startups, especially those with something worth stealing. Some sites provide this kind of security, at a premium of course, while others will allow you to install them as you see fit at your own expense.
Get the necessary cover
Once a suitable site has been established then any necessary insurance and legal coverage needs to be established before anything commences on the site. The implications for not obtaining insurance can be disastrous and can halt your business before it has started.
As well as building, contents and stock insurance, other types of business insurance you will need include:
- Public liability; protection against claims from the public.
- Employer liability; covers claims against you from employees.
- Product liability; helps if your product has been the cause of injury.
- Business interruption; financial cover following a disaster that halts business.
- Professional indemnity; helpful if you use data or intellectual property.
- Legal protection; covers any legal expenses that may incur.
- Personal injury; covers medical expenses following injury.
You might not need all of these, but for most startups, especially tech businesses, indemnity cover, employer and legal insurance should always be considered. Personal injury claims similar to those specialized in by Leinart Law Firm are often made against employers for many reasons, so personal injury cover should also be considered as a part of your insurance package.
Power, water and gas are used more than you might expect
One of the biggest expenses you will incur next to your lease is the cost of utilities such as electricity, gas, and water. An office alone uses a lot of electricity when you consider the numerous computers, printers, scanners, and other equipment required for a modern-day office environment which might be further compounded by specialized equipment that your business requires.
The cost of water is also a key expense since staff need to use restrooms, drinking water must be supplied by law, and water is used for some manufacturing processes such as painting, special treatments, and chemical dilution. Other necessary functions such as boilers, air conditioner systems, and product cooling solutions all require water. Water as an expense can add up but there are companies that provide wastewater management solutions that recycle your water to be used again.
Gas is used in many manufacturing processes and that too isn’t exactly free. As well as being used for heating the building and its water, large amounts of gas might be used in the manufacturing processes for the pharmaceutical, biotech, and aerospace sectors among many others.
Make sure you are authorized
There are many industry sectors that require licenses and permits in order to operate. As well as a basic business license, other permits may include tax IDs, SEC certificates, and employee-based permits.
Environmental requirements are also needed for certain types of machinery and must comply with local laws focused on different types of pollution, damages, or emissions. The necessary licenses are also required for different types of storage from metals and compounds, chemicals, hazardous materials, or even radioactive substances, many of which are used in different manufacturing techniques.
While acquiring necessary and required permits might pose a challenge in and of itself, you should remember that they can be revoked at any time should an inspection or investigation find that you are in breach of any of the legal requirements of holding such licenses. The Theranos scandal saw the company in very hot water by not adhering to multiple permit regulations and has since seen its investors lose well over $1 billion.
Talented people are hard to find
The lifeblood of a company is clearly its employees. The hard-working staff of your business are the most valuable resource you have, but also the most expensive. Nobody is going to work for free and the cost of living is always on the rise. As a responsible employer, you have a duty to pay your staff fairly as a reflection of the work they do.
As your company’s biggest expense, great care needs to be taken when hiring new personnel. The interview process, while tedious, is a necessary methodology when looking for a talented individual to join your team. You will need to ensure that you have made the correct decision as an incompetent employee can cost a lot of money.
On the other hand, you should always consider turning a good employee into a great one by offering incentives to stay, bonuses, rewards, and training and advancement opportunities. These might sound like initial expenses but low employee retention can cost a business dearly as it can take a lot of time and effort to replace a highly educated colleague with specialized skills.
A digital campaign is essential
One of the most important modern-day essentials for a business, especially a startup is the correct marketing. In a world of constant information, marketing no longer applies to magazine ads and paper flyers, but a whole host of online and digital components.
A website should be the very beginning of your company’s marketing strategy and should exist before you begin your operation. If you have used crowdfunding then you will probably have a good website in place and once established, the site should be expanded because when someone hears about your business, the first thing that they are probably going to do is Google your website.
Many companies now choose to publish their own blog on their company website, which while isn’t necessarily marketing, does give you an opportunity to explain exactly what you are doing to your audience. Useful blog posts such as company charters or roadmaps, new and upcoming products and helpful guides made by your company professionals are all popular among businesses and consumers alike.
Other marketing initiatives should now include social media engagement and video publishing. Actively engaging on social media platforms such as Facebook, Twitter and Instagram allow you to interact with potential clients and customers on a scale that was never possible just a few years ago. Studies have shown that a company that connects and engages with an audience is more likely to build brand loyalty which ensures repeat business.
Video publishing is also fast becoming a popular way of marketing products, businesses, and individuals. Internet audiences, especially younger ones now tend to use video platforms for their information such as TikTok and YouTube. YouTube is especially useful as it allows you to create digital content based solely on your business, just like a blog does.