A great business idea is just a foundation, a starting point. If you think that there’s enough potential to build an empire on it, first you need strong business structures to support it. Every small business is characterized by one essential thing – growth. Newly founded businesses, therefore, need to overcome many different hardships in order to survive and grow. Beside the planned costs of a business launch, young entrepreneurs discover many hidden costs, as well, that they didn’t see coming. These are some of the hidden costs of every startup launch, and here you have explained why they are essential for a good business start.
Insurance
There are different types of insurance for supporting different policies. If you have employees, then insurance for covering employers’ liability is mandatory. A professional indemnity policy may help to protect your company, because it covers your business if a client makes any claims for negligence against you. The public liability policy covers you from the risk of being sued by any members of the public. Also, consider insuring your own inability to work due to injury or illness, as well as your business gadgets and equipment.
Taxes
During the first few years of business development, profits are usually very limited. In order to spread their business operation, most entrepreneurs then reinvest their profits, but taxes still need to be paid. Limited liability companies, for example, have to pay $800 each year, even if they don’t gain any revenue, and even sole proprietors need to pay 8% of their gross income.
Surety bonds
You’ll probably need to buy a license surety bond if you decide to launch a service business. These bonds can be bought from surety companies and are there to protect any of your future customers from any kind of damage that might be associated with your business. The surety company will assess your corporate and private assets, as well as your credit history. Contractor license bonds are, for example, needed for construction jobs. For instance, a performance bond is a type of surety bond that guarantees that jobs will be completed (by the contractor) in accordance with contract specifications.
Surety bonds can benefit your future business in various ways, can help you quickly solve any kind of customer damage claim, and protect your reputation.
Technology costs
Technology can help your business in various ways, enabling you to work more efficiently, save money, and get new opportunities. Web presence is required for every business, and it will cost money to get a professionally designed website, along with the domain and hosting. A company also can’t afford to lose any of its data, so using a cloud-service or paying for an online back-up is critical and highly recommended.
Accounting and legal fees
Business owners have to realize that they can’t do all the work by themselves. As the company grows, you should be involved and well-informed about certain aspects of it, but the work should be left to other professionals. When it comes to financial and legal obligations, you will have to employ specialists. At the very beginning of your company’s life, you’ll have to make accounting and legal decisions for your business. However, these fees can add up quickly.
In the beginning, you will need to make legal and accounting decisions for your business, and deal with your accounting methods, intellectual property protection, and type of business structure. Choose professional and reliable accountants and lawyers to help you make the best decisions for your new business. Otherwise, you risk making uninformed decisions that can seriously jeopardize your business.
Licensing fees
In order to get their business incorporated in a state that charges lower licensing fees, many entrepreneurs choose to change their business’s residence. In order to get a business license, you’ll need to buy a license surety bond, and pay a license fee to the state licensing authority. How much you’ll have to pay in total depends on the type of business structure you choose to incorporate, federal and state industry regulations, and the physical location of your company.
Recruitment expenses
Hiring employees is a process that will also cost you some funds. Company owners need to pay for the jobs ads, launch campaigns on social media platforms (for better targeting options), and spend time to test, interview, and select the best candidate for the job. If you already have a built community or can reach out to candidates in other online communities, you can use these networking associations to save some money during the recruitment process.
Office space
If your company is scalable and starts growing fast, that means more employees, and more employees means bigger office space. You will need to rent the right office space, and pay rent and utilities on an annual or monthly basis. Office space owners usually ask for an insurance policy that will cover them in case you leave the office without paying utility bills or damage the office furniture, or for a deposit sum. If you don’t want to move your business into a dedicated office space, start from your home office and move after the company starts growing. Another option is to rent desks in a co-working space (if there are no more than 5 employees), and use it in the beginning phases of your company development. Both of these options are cheaper, because you don’t need to pay for office rent and expensive utility bills.
Employee training and registration
After the recruitment process ends, you need to register and train your newly hired workforce. Beside their basic salary, you’ll have to pay for the employment taxes: unemployment tax, Medicare (in certain states), and social security. There’s no way to save money when it comes to taxes, they need to be paid. However, you can avoid spending too much on training by enrolling them in online courses, employing more experienced employees to train them, or training them yourself.
Certain business expenses are quite clear, but others can be harder to predict. When you plan your company, look out for startup costs that seem less obvious. Be cautious, because you don’t want to run low on cash before you even manage to return your investments and start making profit.
