If you are a small business owner, you understand the importance of staying on top of your financial situation. However, as many start ups discover there are more than a few unexpected expenses that can quickly put your income or stability in danger. Here we will focus on the top 3 hidden costs keeping your business from success.
Credit Card Fees:
Today the majority of consumers prefer to pay with a credit card or debit card instead of using cash. Accepting cards from your clients and customers is convenient and necessary for survival; however, it comes at a cost. The average processing fee is 0.05% for debit card transactions, but……. (drum roll please) credit cards are 1.5 to 1.65 percent.
Besides this high processing fee, a customer can also decide to dispute the transaction. The money will be returned to the credit card, and the business will be hit with a chargeback fee. The amount is set by the payment gateway and is supposed to cover the cost of returning the fund to the cardholder.
The charge typically falls between $15 to $25 per chargeback; this is not that significant of a loss if you incurred only a few per year. However, if this is a repeated occurrence you will be classified as a “risk merchant.” This title will result in higher processing fee, and you will be in danger of losing your ability to take credit cards at all.
Even if your business is located in your home office buying business insurance needs to be an early thought. The most obvious reason to purchase insurance is to protect your investment. If a fire destroyed your equipment necessary for work would you be able to continue to receive customers or orders?
If you are a homeowner, you may be given a small amount of coverage for business property, but the majority of policies do not include businesses operating within the home.
The next point may shock many of you, but small businesses are prone to being targeted by frivolous lawsuits. Lawyers try to target small businesses because they are more likely to settle a case rather than go to court. Start ups just don’t have the funds to fight a long drawn out court battle. The average settlement is under $5,000; however, that does not take into account the lawyer fees and other charges.
Then after the lawsuit is settled, you will find your liability insurance premiums have jumped up over night. Plus, the time and attention you devoted to the case drew you away from your business.
Expect the Unexpected:
Far too often small businesses miscalculate the cost of owning a business. Part of running a successful business is budgeting and preparing for the unexpected. Before opening your business start an emergency fund and continue to add to it each month. With this nest egg, you will be well prepared for anything life throws your way.