From YEC
When creating a budget, entrepreneurs may consider some of the more obvious expenses, such as labor costs and production costs. However, some important expenses may be overlooked, which can have a significant impact on the health and longevity of your business.
To help you create a more accurate business budget, members of the Young Entrepreneurs Council discuss the less tangible costs of running a business. From professional development to software upgrades, include these major costs in your budget.
What expenses do entrepreneurs need to budget for each year but often overlook? Why is it so important?
1. Own salary
Too many people approach business by making decisions centered on profitability without thinking about their own basic needs. You don't necessarily have to pay for it yourself, but you do need to be part of the equation. If you're making pricing, contract decisions, and expense decisions without thinking about what you're paying yourself, you're making mistakes. —Zane Stevens, Protea Financial
2. Potential business opportunities
Create a budget for unexpected opportunities. Such reserves allow you to acquire arbitrage investments without jeopardizing your existing budget. This is a strategic allocation of capital that fosters business agility while ensuring flexibility and the ability to take advantage of unexpected and unplanned opportunities. —Devesh Dwivedi, Higher Rating
3. Bonuses and team building activities
Budget for annual bonuses and team building initiatives. Most companies distribute profit shares or fixed bonuses each year and organize activities (such as Christmas parties) without budgeting or allocating them throughout the year. This can quickly jeopardize any form of profitability assessment or financial goals at the beginning of the year, potentially depleting cash reserves when the time comes. —Mario Peshev, DevriX
4. Industry research
To grow your business and stay ahead of fierce competition, you need to understand your customer's needs, analyze your competition, and stay on top of ever-changing market trends. This requires extensive research. Therefore, you need to have a clear idea of the funding and resources that may be required. —Stephanie Wells, Formidable Forms
5. Business insurance
Entrepreneurs should not overlook annual business insurance budgeting. This includes essential general liability, professional liability, and property insurance to protect against lawsuits, accidents, and damages. Appropriate compensation is essential to prevent financial losses due to unexpected events. —Anna Anisin Data Science Salon
6. Professional development
Entrepreneurs should always allocate a budget for annual professional development. This is an often overlooked but important investment. This allocation is very important as the business environment is constantly changing. This allows entrepreneurs to stay competitive, adapt to industry trends, and stay up to date with the latest technology, contributing to personal growth and long-term business success. —Kristin Kimberly Marquet, Marquet Media, LLC
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7. Unexpected costs
Honestly, I think every entrepreneur should budget for unexpected expenses. I have a fund that I put money into every month. Because I have no doubt that something will happen when I least expect it. Ever since I started saving, I've had to dip into this cash several times a year. This strategy allowed us to stay on top of the situation and keep things running smoothly, even when additional costs were incurred. —Daman Jeet Singh, FunnelKit
8. Cybersecurity
Business owners often overlook the need for robust cybersecurity measures. With the rise in digital threats, it is essential to invest in cybersecurity to protect sensitive data, maintain business reputation, and prevent costly breaches. Prioritizing this expense ensures long-term viability and protects against evolving cyber risks. —Jared Weitz, United Capital Source Inc.
9. Networking event
Entrepreneurs should budget for the networking events they will attend. In some cases, these costs can be very high if not properly planned. Every entrepreneur needs to attend multiple events to increase connections and creating an event budget will help anyone decide on the right event with the right ROI for her. — Piyush Jain, Simpalm
10. Product research and development
Research and development is an essential expense for companies in the technology sector (as well as other companies such as pharmaceuticals). While not completely overlooked, the time and cost of thoroughly researching every detail about a product or service is often underestimated. For example, it's important to conduct tests, surveys, or focus groups to test the customer experience of your product or service. —Karin Kassaboff, Protexing
11. Software and Equipment Upgrades
As entrepreneurs, we may budget for the initial purchase of equipment and software, but overlook the need for regular upgrades. However, outdated equipment and software can cause reduced efficiency, increased downtime, and potential security vulnerabilities. —Andrew Munro, Affiliate WP
12. Taxes
One expense that many business owners struggle to realize is taxes. You should always keep an account set aside for taxes. You may have more debt than you realize, including for real estate, income, sales, and other business expenses. Don't be caught off guard and always hire a professional to make sure you're not overpaying. —Chris Kristof, MonsterInsights
About the author
Young Entrepreneurs Council (YEC) is an invitation-only organization comprised of the world's most successful young entrepreneurs.
