Are you planning to open a business and wondering what monthly costs of running a business you should prepare for? From this entry you will learn, first of all, what costs are associated with running a business. Which costs are variable and which are fixed? We also discuss issues that are worth considering before opening your own business.
What is a sole proprietorship?
You can easily find many definitions of this form of activity on the Internet. So we will just provide a short summary to help you understand this concept.
In short, a sole proprietorship is a gainful activity that you perform on your own behalf (as an individual). The only caveat is that it must be performed continuously, not occasionally.
It is commonly said that sole proprietorship is the simplest form of starting your own business. Anyone who has experienced this knows that there is a lot of truth in it. Did you know that you can register your own company in one day?
How is this possible? Well, you can submit the application during one visit to the office. Moreover, it can be done online, which will shorten the waiting time for other applicants as much as possible. You simply complete the appropriate application, the purpose of which is to report the establishment of a company. All necessary offices are automatically informed about this, i.e. the Tax Office, ZUS or KRUS, as well as the Central Statistical Office.
One of the advantages of being a sole proprietorship is that you don’t have to have a certain amount of money to register your business.
Sole proprietorship – what should you do before opening your own business?
It is not enough to decide to open your own business. You need to prepare for this in advance. First, ask yourself whether you see yourself as an entrepreneur at all. Many people forget about this issue, although it is very important. Not everyone is suitable for this role.
Then you should analyze the costs associated with the operation of your future business. I’m sure you realize that some of these fees are necessary for the company to operate legally. Thanks to the preliminary cost analysis, you will be able to assess the risk associated with opening a business. Of course, to the extent possible at this stage.
You also need to prepare a business plan, which is very helpful in starting your business. Now you may be wondering what it can give you. A business plan should primarily function as a written business strategy, so it should contain a lot of information. This may sound strange to some, but writing down these assumptions will allow you to see things that you can’t see when you have them in your head. You may think the plan is perfect and then it turns out otherwise. Putting your thoughts down on paper often makes your work easier, so we recommend doing so.
It is possible that thanks to this procedure you will notice some inaccuracies or even defects that you were not aware of. I will also add that the form of the project will differ depending on whether you are preparing it for yourself or for an investor. It will be good to take this into account.
Have you already completed all the above steps? If so, it’s time for the final step – formalities related to registering the company.
Start-up costs of your own business – what should you include?
Every entrepreneur who opens his own business wants to know how much money he needs to allocate for investment. There is no clear answer to this question. In fact, most of the costs will depend on individual factors. What?
The type of company (service or manufacturing) and its size are the most important. It is also important whether you will employ employees and whether you need office space. It is possible that you are planning to perform services for which you need some specialized equipment.
You are probably aware that each of these issues affects the amount of costs you will incur. First, you need to pay attention to the basic aspects of investing in your business.
We would also like to point out that you will not find a specific amount of money here, which you will prepare well in advance and with its help you will achieve success. It does not work like that. We will only present you the aspects that should be taken into account when you want to start your own business. You must make appropriate calculations yourself based on the developed business plan. Remember that each case is different and should therefore be considered individually.
What are the costs of running a business?
Some people say that having your own business does not incur any costs. However, this is not true. I guess everyone realizes that if you want to make money, you must first invest. Although the registration itself is free of charge, subsequent running of the company involves certain expenses.
Some of the costs associated with running such a business require regular payment by the entrepreneur. The first are administrative and fiscal fees. Belong to them:
- ZUS contributions (always, obligatory),
- income tax advances (if you make a profit),
- VAT (if you are a VAT payer).
Other costs incurred by a person who runs their own business include:
- accounting (accounting office),
- renting office space (if necessary),
- own domain + hosting for the website,
- creating a company website (or store),
- visual identification (logo, color selection, etc.),
- marketing (Google Ads or Facebook Ads ads),
- company stamp,
- office equipment and supplies,
- leasing or loan installments (if any),
- the employment of workers,
- subscription for internet, telephone and software,
- firm car,
- staff training.
Later in this post, we will discuss the most important points in more detail.
What might the monthly costs of running a business look like?
To start with, specific costs will vary for every business. As we mentioned earlier, they depend on many factors. Therefore, it is not possible for all companies of the same type (e.g. sole proprietorships) to require the same amount of investment. Moreover, without knowing the details of a given business, these amounts can only be estimated.
We will also mention here that you can skip some of the costs mentioned (especially at the beginning). This includes professional office equipment and visual identification. Remember, however, that you cannot give up something that is fundamental to running a business.
Moving on, monthly business costs can be presented as variable and fixed costs. This will make it easier to visualize individual expenses.
We talk about fixed costs in the case of expenses that the company must constantly incur regardless of its activity. That is, even if he does not earn money. It is worth remembering that these are costs that may change due to various external factors. This includes, for example, the amount of rent or the electricity bill.
In the case of variable costs, these are all costs that depend on the production volume. These include, for example, remuneration for overtime or a discount for ordering more materials.
Running a business – fixed costs
Fixed costs include:
- ZUS contribution – the specific amount will depend on the insurance you are covered by; best to check it individually,
- accounting – depending on the accounting office, you can check it approximately using an online calculator or by asking for an offer,
- maintaining a bank account – business accounts usually have fees; In addition, you can also use additional services that are paid extra,
- income tax advances – these depend on the income you have earned. They are also influenced by the form of taxation you choose (under general rules, lump sum or flat tax),
- loan or leasing installments (if you plan to take out a loan or lease equipment
- fees for renting a premises (rent + utilities) – the amounts will depend on the city, it is worth doing research; in the case of utilities, the cost can be estimated based on previous bills, taking into account possible consumption). It is worth mentioning that you can have a virtual office or in an apartment/house, which will significantly affect the costs incurred,
- insurance, monitoring and protection (in the case of an office),
- Internet and telephone subscription (cost will vary depending on the provider) + necessary software (e.g. specialized programs),
- costs related to maintaining the company website (or online store),
- company car (inspection, possible breakdowns, insurance).
We will also add that in the case of payments that are made once a year, it is worth dividing their cost into specific months. This will make it easier to plan average monthly expenses and will also relieve the budget at the end of the year.
Own business – variable costs
Variable costs include:
- business trips (including fuel or ticket costs, accommodation, meals, etc.),
- costs of producing products or services (e.g. raw materials used – depending on what you do),
- bonuses for employees,
- costs related to operating the car (fuel, repairs, spare parts),
- transport costs (courier, post office, parcel locker),
- advertising and promotion,
- office supplies,
- cleaning products.
As you can see, there are many costs associated with running a business. Especially for a beginner entrepreneur. Therefore, it would be a good idea to first find customers who could pay your first costs related to the company. Fortunately, there are ways to do this – you could do your first jobs, e.g. as a volunteer. Another option is to reach an agreement with a friend who is an entrepreneur – thanks to this, you could work under his wings at the beginning. It is possible that it would also introduce you to the secrets of entrepreneurship.
If you can’t use any of the above methods, you can simply save some money before opening your business. This will ensure that you are able to pay any necessary fees in the first few months of your business, as this is when things will likely get tough.
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CEIDG report – number of activities in 2021 in Poland
Let’s take a look at the report prepared by the Central Registration and Information on Economic Activity. According to him, as many as 290.6 thousand were created in 2021. sole proprietorships.
Compared to the previous year (2020), their number increased by almost 25,000. The largest differences occurred in the period from April to June 2021.
Interestingly, this type of activity was suspended over 70% more often than in 2020. Are you curious what this report looks like in its entirety? It is available here.
It is easy to notice that more and more people decide to open their own business, most often a sole proprietorship. It can be assumed that this is due to the simplicity of company registration and relatively low costs. However, it is worth paying attention to the fact that they are liquidated just as often.
Remember that if you want to prove yourself as an entrepreneur, you do not have to set up a sole proprietorship right away. Instead, you can choose, for example, unregistered activity, which works better as the so-called company on a trial basis.
We hope that our entry helped you realize what you need to pay attention to when estimating the monthly costs of running a business.