You’re too excited to think about expenses.
And why wouldn’t you be? You’ve just chosen to go into business for yourself – the realization of a likely years-long dream. Your opportunity to build a better product or bring a unique service to the public has finally arrived.
Worrying about costs now would only kill momentum.
Well, if you aren’t already considering potential start-up expenses, your journey from stoked to stressed may be short. Building a business comes with plenty of costs you may or may not be expecting. Shopify found that “small business owners spend an average of $40,000 in their first full year of business.”
For those out-of-the-ordinary expenses especially, it’s critical to know where you might need to allocate your money as you start to set up shop. We’ve compiled these lesser-known costs for you to consider as you get your business off the ground.
Many small business owners plan to do everything themselves, but professional assistance can take some of the weight off an owner’s shoulders. More importantly, financial and legal advice can save time, money, and even protect from a worst-case scenario. It makes up for whatever shortcomings you may have as a new business owner so that your track record in the marketplace stays positive.
- Accounting Experts: While you may be an expert in the field of your new business, that field may not be accounting. Hiring an expert to reconcile business expenses, pay bills on time, and ensure that taxes are collected and paid properly can keep you out of financial hot water.
- Employment Lawyers: Professional advice isn’t limited to the financial realm. If you’re planning to hire employees, consider retaining services of an employment lawyer or HR consultant. These folks can help keep you abreast of proper wage and employment laws in your state, update you on federal hiring regulations, and make recommendations when an employee becomes a problem.
- HR Consultants: For these needs, an HR consulting firm should work fine. Many of the best HR firms have their own employment lawyers on staff. Expect to pay regular fees to a bookkeeper and a retainer, or hourly costs for HR consulting or an employment lawyer.
Going online is not an option for a new business – it’s a necessity. You need a buttoned-up website that transparently promotes your business’s products, services, operating hours, and contact information.
So, expect to spend money for a quality website host, web design, site maintenance, and online security. If you’re taking payments from your website, ensure you have premium security to avoid compromising your customers’ data. A strong and trustworthy online presence makes a big first impression, especially when you’re new and building your brand.
Customers visiting your website for the first time may not be going there to buy – even if you’re an exclusively online business. Savvy shoppers use their computers or smartphones to compare products and services online before committing to a purchase.
This makes your web hosting, web design, and user experience important, especially as small businesses don’t have the brand recognition and larger marketing budgets that regional companies enjoy. Expect to spend more than you anticipated for a premium online user experience.
Unless you’re planning to run your business solo or as a partnership with one or two others, you’ll need to hire staff. Expect to spend money advertising for open positions, as well as background and employment history checks for your top candidates.
An HR consulting firm can take a lot of the busywork off a small business owner’s plate, as well as conduct reference checks and the like in compliance with fair hiring practices. Businesses that choose to have pre-employment drug screening (some types of business licenses require this) should expect to have higher costs at the outset since you’ll be testing multiple employees at once.
Hiring an HR consultant to get you staffed isn’t just about expertise in recruiting, interviewing, researching candidates, and filling out employment paperwork properly – although these are all important. These things take a lot of time, and for a new company, time is money. Consider if it’s worth hiring a consultant for around $1,000 to take care of initial staffing, instead of taking time each day to address the hiring process.
Each business has different requirements for insurance coverage. Construction companies, medical practices, and restaurants tend to have higher coverage requirements, due to the nature of the business. Workers’ comp, malpractice, and liability insurance (in case a lawsuit-happy customer slips on your floor) are all important. Purchasing the initial premium may be a lot more than the monthly costs you’ve worked into your business plan.
In addition to the insurance coverage required for your business license, consider supplemental insurance. Contractors, for instance, can benefit from additional coverage, as potential injuries could cost more than the standard premium. Your business may be small enough that you won’t be required to offer health insurance for employees, but if you plan to grow, be sure to keep this upfront cost in mind for budgeting in future years.
If you have questions about which coverage options are most appropriate for your company, these resources may offer some clarity.
Pair your excitement over starting a new business with an expectation that start-up costs are coming, and not always in areas you may expect. Inventory, leasing fees, rent, general overhead expenses – they are all typical for a small business opening. To ensure yours is a success, though, don’t neglect these lesser-known start-up expenses.
BBB Great West + Pacific contributed to this article.