The Top 7 Expensive Mistakes New Businesses Make

Corporate Structure

When organizing the firm, some companies tend to start out small and use an LLC or Partnership form of organization. If you are a services firm, this can sometimes cost you revenue when doing business with large firms or the government as they prefer to work with corporations for their outsourcing or consulting work. There are also tax implications that can be avoided by choosing the form of company that fits your organization the best.

Office Space Leasing

If you are a retail company, location is very important and you may need to pay more to get what you want. Just the same, never lease too much space when you are first starting out. Instead, look for a situation that allows you to grow when revenue merits it.

Technology Purchases

With technology changing all the time, putting in a sophisticated information systems infrastructure is now possible without a lot of cost. Keep it that way. Within 10 years, some predict the average desktop computer will fit in a space smaller than your wristwatch and cost a lot less than systems do today.

Hiring / Staffing

A lot of new companies work with part-time or temporary help until they can afford to pay full-time staff. It is actually less expensive in many portions of your business to outsource the work to professionals that can scale up to work as many hours as you need instead of bringing people on-site. Your savings include staffing costs and extra office space.

Broken Equipment

While trying to save money, some business owners end up actually spending more by skimping on important tasks like maintaining and updating equipment. Restaurant owners should spend the money to have professionals service their cooking equipment, and tech companies should constantly update their computers and protect them from viruses. By spending a little money for prevention, businesses can save a lot in broken equipment.

Payroll Tax

One of the hardest things for new businesses to work through is payroll tax. If you have employees and you get the information wrong, you can end up with a large tax liability. So instead of worrying about it, many firms go with boutique firms that handle their payroll tax for them. Recently, however, accounting software has become sophisticated enough that for a fraction of the cost. You can use an online service instead that has thousands of hours of quality assurance done on it yearly and is accurate enough to partner with tax agencies.

Worker’s Comp Insurance

Obtaining Worker’s Comp insurance as a new firm can be a minefield. One firm found a 300 percent spread in prices quoted to them for the same set of circumstances. They ended up turning to a state-run program and paid one tenth of the highest quotation.

While it’s important to save money when starting a business, there are some common mistakes that can cost you much more than expected. Understand where you should spend money now to save more in the future so your business can continue to thrive.

Author: Anita Ginsburg is a freelance writer from Denver, CO. She enjoys writing about business, education, home and family. Informational credit to K & D Factory Service Inc.