Beware these Hidden Costs of Starting Your Own Business

MaxFilings is here to help guide you through essential steps of incorporating your small business.

Being the boss of your own small business has probably been a dream of yours for quite some time. Becoming a small business owner is a lofty goal and one that shouldn’t be taken lightly. When you are developing your initial business plan, there are a variety of expenses you need to consider. The old adage that you have to spend money in order to make money is usually accurate.

Whether you are an LLC, S corporation or C corporation, a main cause of business failure is underestimating the unexpected costs that arise when beginning your venture.

Below are some examples of these hidden costs that entrepreneurs need to consider.

• Employees. Payroll, health insurance, workers’ compensation insurance, vacation, sick leave and other costs associated with employing people often make up a hefty part of a business’s expenses. The cost of employee turnover is significant as well. Make careful selections in the people you hire and invest appropriate time and money into training them.
• Credit card fees. Making payments and checkout easy for customers is essential. Paying with credit cards is often a popular choice among buyers. Expect to pay three percent of in fees for credit card transactions.
• Licenses and permits. Do you need a license or permit to conduct your business? Once you are aware of the permits you’ll need, investigate the cost into each of them and prepare for these in your preliminary budget.
• Office space and utilities. Carefully research the best place to rent and conduct your business before signing any type of lease. Does your business need good road exposure? Is a physical space mainly for storing/manufacturing a product or do you need a storefront? Consider utilities as well. You may find a great location, but ask for past utility bills to determine if this will fit into your budget before signing.
• Repairs and maintenance. There will always be unexpected repair and maintenance costs. Are you handy and able to save a lot of money by fixing most of the issues yourself? If not, do you have a reliable and affordable handyman who can help when problems arise?
• Equipment. Do you need brand new equipment to get off the ground or are you able to use cheaper secondhand systems and gear? Avoid spending money unnecessarily on office equipment that you might need. Decide for certain what you must have in order to conduct your business as efficiently as possible.
• Professional fees. Networking is a large part of marketing your business (which is another big cost). Belonging to professional organizations can be very beneficial but also financially draining. Select just a few industry organization that would provide the best value for you to join by giving you good exposure and repute.
• Insurance. Not only will you likely need the workers’ compensation insurance as discussed above, but you should also consider other policies such as public liability. For instance, if a customer is injured while shopping in your store and they decide to sue you for negligence, you will want your insurance to cover you. Be prepared for the worst just in case.
• Your time. Some people definitely underestimate the amount of time that is involved in a start-up business. Realize that you will have much less personal time and try to gain the support and understanding of your family and friends.

A general rule of thumb is to prepare a budget 20 percent over your anticipated costs in case of unexpected expenses such as these. It’s better to be safe than sorry! As long as you are prepared and know that costs are often greater than predicted, you will be ahead of many small business owners.

Perhaps you are in the very beginning stages of starting a business. If so, MaxFilings can help guide you through incorporating your business in addition to other business services.

For more tips on running your business, browse our knowledge center.