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Nov 24, 2014

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5 Expenses Your Startup Can't Afford to Overlook

During the planing stage, often startups ignore some costs that are necessary to keep their business a float. These unexpected expenses can be decisive in stability and future of the organization. Learn about them.

5 Expenses Your Startup Can't  Afford to Overlook
  Getting a startup off the ground today can be very challenging, especially where expenses and budgets are concerned. In a market where 8 out of every 10 businesses fail within the first two years of launching, looking seriously at all necessary expenses before opening the doors is a must in order to secure your business’s financial future.

  Whether there wasn’t enough operating capital or a lack of planning and experience, repeatedly businesses are hit with other unexpected expenses. Here are five common expenses that are often overlooked and missing from a startup budget:

1) Play Nice with Your Government: Employee Benefits & Taxes

  These rates, along with their associated laws and regulations, can depend on your city or state, and often federal regulations are involved. Those who have never had to make payroll may not be aware of this all these added expenses. Furthermore, in order to be competitive in the labor market, businesses need to remember that the benefits they offer to their employees, and team members are also included in these taxes as well.

  To make matters worse, sometimes these laws change and this can hit the bottom line of a new venture pretty hard. Come November election time, the passing of a fresh ballot measure could influence these rates or requirements and drastically change the budget.

2) Furniture Doesn’t Grow on Trees: Office Brokers and Equipment

  When acquiring a new office, usually the building pays the accompanying broker’s fee, but other times they do not. This is yet another unexpected expense that could be missing from the pre-opening analysis. Even if this is discussed prior to acquisition, there may be a need to set aside some extra funding for this possibility.

  Depending on where your startup is stationed, whether at home with a few employees or in a retail store, hidden costs often associated with starting a business also include suitable furniture, proper electrical wiring, fast Internet connections, cleaning supplies, and other charges outside the monthly rent. If you’re opening up a retail store, include tables, shelves, and at least a working cash register into those expenses as well, especially if you’re starting from scratch.

3) Prepare for the Worst: Property and Casualty Insurance

  Another line item in the budget that can blind side a startup is insurance costs. Again, regulations vary, but rates to carry mandatory liability coverage can sometimes run into the $10,000 to $20,000 range per annum. An additional thousand dollars or more in monthly insurance costs could bankrupt a small startup very quickly.

  Whether you need protection in case your programming code fails to work correctly or to shield your board members from lawsuits, having the right insurance is the key to avoid potential bankruptcy.

4) Protect Your Brand: Trademarks and Domains

  Most companies will earmark legal expenses, but there are often other costs that could sneak up on the unsuspecting startup. If your valuable brand name needs protection, there are trademark laws and copyright fees to consider.

  Doing business online is a must and although domain names are pretty cheap, gathering domain extensions for your brand can become expensive. You’ll want to make sure there isn’t another business using your domain overseas and taking potential customers from your company.

5) We Have the Technology: Software Services

  While most understand the need for computers, networking, servers and modems, often overlooked are software services. One company will host your website, and another may charge for additional email services.

  In the past, one might purchase word-processing software and be set for the next few years, but today, most companies charge an ongoing, yearly fee outside the up-front cost of the software. Typically, these costs won’t break the bank, but they should still be in the budget. Just make sure that you create an effective budget that will give your startup the most value.

  A startup must have everything they need to make it through their first few formidable years in order to reach success. Ensuring that all expenses are included above the bottom line can mean the difference between winning and losing this difficult startup game.


Hilary L. Smith is a guest author and online journalist whose writing covers business telecommunications, globalization and virtual and event technology. Follow her on Twitter to read more of her writing!