Every business owner understands there is a cost of doing business. Capital purchases, monthly rent or mortgage, inventory and marketing costs are some that are generally expected of business owners. But there are other hidden costs that are not so obvious.
Federal regulatory compliance is one example of a hidden expense that many industries, including financial institutions, are facing today. In fact, some of the biggest financial institutions in the country have hired thousands of new employees just to handle regulatory compliance issues. In addition, financial institutions are working to stay ahead of malicious data thieves without losing their competitive edge. When it comes to technological advancements such as mobile accessibility and online interactions, both innovation and security are of key importance and there is a price tag tied to both.
Business owners know the costs of doing business must be factored into the pricing of products and services. The value of some of the hidden costs of doing business, however, might not be as apparent to the general public. Some might only see an increase in pricing or fees, without fully having an awareness of the context behind those increases.
It goes without saying that it takes a bit more than hanging out a shingle to run a successful business. If you are considering becoming a business owner, are you prepared for the hidden costs of doing business? More importantly, have you considered how you will work them into your pricing strategy? Here are three important costs to consider.
Benefits. The Bureau of Labor Statistics reports that benefits account for more than 30 percent of employer costs.
To break it down further, the federal government estimates that insurance costs an employer an average of $2.54 per hour worked, while paid leave costs an employer between $2.16 and $4.82 per hour worked. It all adds up.
Regulations. Many industries, beyond finance, need to comply with regulatory oversight — from healthcare to real estate, to construction and hospitality.
The issues they face relate to safety, legalities, planning and security. In order to ensure adherence to all regulations, it is oftentimes necessary to hire specialized in-house staff or even contracted consultants.
Security. No business wants to be the target of a data breach. And nobody wants to deal with the headache associated with the cleanup. As hackers find new ways to access data, consumers continue to demand increased accessibility and convenience. Protecting data and access is a delicate tightrope for businesses to walk, one that requires a growing investment in both security and technology. All this leads to a rise in the costs associated with protecting data.
While the benefits of some of these hidden costs might not be as obvious to consumers, the fact is that sometimes they are necessary evils that if not built into a business plan, could have a detrimental effect on a businesses in the long run.
(Editor’s Note: Rene Almazan is a senior vice president for Vantage West Credit Union, a $1.5 billion financial institution in Arizona, which serves a growing membership of nearly 135,000. Vantage West serves its membership via online channels and branches across Arizona, offering consumer and business banking services. Vantage West is federally insured by NCUA. www.vantagewest.org)