Running a company has never been easy, but with new challenges cropping up over the last few years, rising business overhead costs are chipping away at budgets more than usual.
From shifting workforce habits to the jump in energy costs (and the overall cost of living crisis), the financial planning required to successfully juggle modern business costs is becoming much more involved.
Here, we address the three main culprits of these increases and show some effective ways of dealing with them.
Regardless of your industry and specific offering, with recent inflation chances are you’re seeing rising business costs for your materials. This could range from manufacturing materials to retail goods, and pose significant problems, especially when paired with supply chain disruptions.
Another prominent example of rising costs is the skyrocketing business electricity costs many companies could face.
Of course, making sure your team have a warm workplace in the winter months is essential, but it’s hard to ignore the fact that wholesale energy costs have increased exponentially over the past few years.
Now that we’re living in the age of hybrid (and even fully remote) working, companies are increasingly finding that it doesn't make financial sense to rent office spaces to house their entire team.
This shift can mean entire office buildings can be left dormant for extended periods of time – a significant waste of money.
When it comes to increased material costs, the biggest danger is ending up with too much capital tied up in the production side of the business.
But, with careful financial planning and innovative strategies, such as bulk buying or using locally sourced materials to save on shipping, you can adapt your budget to the new conditions.
Some useful tools to help keep a handle on your office heating include energy-efficient heating systems, as well as things like smart thermostats, which are becoming increasingly commonplace.
However, it’s worth noting that while such tricks will save you money in the long run, they do require an initial investment. It’s definitely something to consider when calculating how much it costs to start a business.
Yes, it’s true that if your workspace is rarely at full capacity, you’d be saving on office supplies, communal kitchen goods, and utility bills.
However, from a budget perspective, you might be better off considering downsizing to a smaller space or even a coworking arrangement before you re-sign that tenancy agreement. This can allow your business to embrace a more modern way of working, with employees allowed to work from home, with fully remote or hybrid contracts, giving the chance to access newer talent throughout the nation, not just in your immediate vicinity.
With these rising business costs examples in mind, it’s important to have a clear picture of expenses if you’re thinking of setting up an enterprise. The exact budget would inevitably vary depending on your industry and the scale of your business, but some typical expenses to consider include:
Admin fees – These cover all the initial paperwork involved in setting up a company, such as business registration, the acquisition of any permits you need, and drawing up all the contracts required for your operations.
Operational expenses – Account for things like initial bulk purchase of raw materials or other stock, as well as insuring your business assets, setting up utility bills, and the daily running costs. We recommend ensuring you have money set aside to cover between three and six months of these expenses.
Workspace – Whether you’re signing a lease for a full office to house your entire team, or opting for alternative solutions such as coworking spots, have some cash earmarked for rent. If you’ve decided to keep things traditional with a dedicated office space, you’ll also need to purchase equipment essentials such as furniture, computers and other core tools.
Digital marketing – Setting up your business brand, along with all the associated elements, such as logo, website, and marketing collateral, is another cost you should account for – even if you’re planning to tackle the bulk of it in-house.
Are business costs going up? Yes. However, your goals still matter and we’re here to help you achieve them. Opportunities for growth are still ample, and the right business savings strategy will help you ringfence capital to fund future success. From fixed-rate accounts to easy access business savings, Aldermore has a product that’s devised to help achieve future goals and maintain steady business growth, despite these increased costs.