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Five Costs That Start-Up Businesses Forget About

If you’re in the process of setting up a new business – or even thinking about doing so – you need to read this article. Planning a new business is an exciting process, but it’s also full of pitfalls. It’s very easy to get so distracted by the headlines that you miss the small print, and it’s in that small print that problems occur. Sadly, the majority of start-up businesses are doomed to fail within their first year. Yours doesn’t have to, but you need to prepare yourself for the expenses everyone else forgets about if you’re going to survive.

If you know you have the higher costs accounted for, it’s tempting just to disregard the smaller ones and presume you can file them under ‘miscellaneous expenses’ or ‘petty cash.’ You’d be surprised how quickly those unconsidered costs can add up – and the damage they can do. Without planning for the small expenses, you’re gambling with your start-up money. You might as well just take your investment, and stake it all on online slots and their sister sites. If you’re going to do that, you should just open a mobile slots website. The mobile slots industry is one of the few which can be relied on for growth at the moment, so if you have the contacts and the skills, it’s probably one of the best ideas you could have for a new business. We suspect that you have something else in mind for your business, though – so let’s leave the mobile slots to the gamblers and take a closer look at the costs you probably haven’t thought about.

  1. Services From Other Professionals

Unless you’ve opened another business in the past, you probably have no idea how to register and incorporate one properly. Even if you have, it’s a matter that’s probably best handled by an expert. Making a mistake with business registration could be terminal to your business before you even start trading, so it’s not something you should gamble with (as we’ve just covered). If you need legal assistance to set up your company, that’s going to cost money. After that, you’re going to need to engage with an accountant early on to make sure you’re doing the right thing with your taxes. That’s your own tax, the company’s tax, and the tax status of any employees you might have. The more work there is for your accountant, the more it’s going to cost you. Don’t be under any illusions about this – it’s going to cost you thousands of dollars per year.

  1. Contingencies

Your business model is probably based on selling at least something in your first few months of operation, however small that ‘something’ might be. What if you don’t, though? What if there’s an unforeseen delay with paperwork or licenses, and it keeps you from opening your doors for longer than anticipated? If you’ve already leased offices and employed people, those bills still need paying. What if a key employee hire decides that your business isn’t for them, and leaves within the first few weeks of trading? They’ll need replacing, and their job isn’t being done in the meantime. Running out of money is one of the most common reasons start-up businesses fail. Don’t open the doors until you have at least three months worth of your entire running costs saved up. Ideally, you should have six.

  1. Technical Support & Web Development

Unless you work in the IT industry, you probably have very little idea about how much computer support usually costs. If you think you can pay someone a few hundred dollars to set up your website, get your email server working and provide on-call assistance, you’ve very wrong. As you know from using computers yourself, systems fail. They need constant monitoring, and support for every hour of every day you’re open. If you factor in the costs of developing a professional-looking website and paying for storage space, on top of all the required maintenance work, you’ll probably spend around $50K in your first year. If that figure is alarming to you, it’s time to look at your whole business plan again.

  1. Office Supplies

Paper. Pens. Staplers. These are trivial costs, but they quickly add up. If you have ten or more employees, they’ll add up faster than you think. The real killer here is printer ink, which is by volume the most expensive liquid in the world. These are just basic supplies as well – people can and will want whiteboards and marker pens. What sort of phones do you have? Will they need headsets? If so, they’ll break constantly and require replacing. Is it cheaper to lease your computers, or will you buy them? If you buy them, how long will they last? Do you need to install Microsoft Office on those computers? If so, do you have any idea how much that’s going to cost? What starts as $10 here and there can quickly turn into $100 here and there, and by the end of the year, you’re wondering where the missing $3000 from your profits has disappeared to. A word of advice: Go paperless unless you absolutely have to work with hard copy documents.

  1. Processing Fees

If only we were still dealing with an economy based on cash. If we were, we wouldn’t feel like we were being robbed every time we took a payment from a credit card. The margins involved in handling those payments can be crippling if you’re working to a tight budget, and you don’t know they’re coming. Some credit cards can charge up to 3% on each transaction you make. That means if you sell something for $3,000, you’re only receiving $2,910 from that sale. $90 might not be enough to make you wince, but one you’ve made ten $3000 sales and lost out on $900, you’ll start to notice. If your business is successful, you’re going to be losing thousands of dollars per year on processing fees, and there’s very little you can do about it. If you haven’t factored this into your projected costs so far, reduce your projected income by 3% and see how much damage it does to the picture.

There are, of course, other fees we could mention. We’re going to assume you’ve already considered the costs of insurance, and a CRM which is fit for purpose. You might have professional or membership fees to take out. You might have licenses to acquire. The bottom line is that every cent you spend has to be accounted for if your business is going to make it through twelve months – otherwise, you may find you have no bottom line at all.