Starting a new business is an exciting time in every entrepreneur’s life, one filled with passion and ambition. What most new entrepreneurs overlook are the hidden expenses associated with launching a new business. Everyone is aware of the standard start-up costs, such as rent and inventory, but many overlook lesser-known expenses that can catch a new business owner off guard. Here is a list of the six hidden costs of starting a new endeavor that, when overlooked during budgeting, can make a difference between success and failure.
The six hidden costs of starting a business are taxes, permits/licenses, employee benefits, administrative expenses, insurance, and consultants. Understanding and preparing for these expenses will help aspiring business owners navigate the financial landscape more effectively.
- Taxes: As a business owner, no matter what entity you create, taxes are one expense you cannot avoid. Depending on your state, you’ll have to pay federal, state, and local taxes. Your tax rate will vary as well, depending on your locality. For instance, California requires a 7.25% sales tax, whereas Texas, requires a 6.25% tax.
- Permits, Licenses & Fees: Depending on the type of business you want to establish, you may need to factor in permits, licenses, or fees. Although many of these are one-time start-up expenses, they can be quite hefty, especially if they are not accounted for when finalizing a start-up budget. These expenses vary from industry to industry.
- Employees & Benefits: The cost of employees and things such as benefits are not always predictable, yet they are necessary if you want to retain top talent and have happy employees.
- Administrative Expenses: Expenses that are required to support your organization’s daily activities fall under the umbrella of admin expenses. Every business has them. They can be adjusted based on the type of business you open and the way you run your business too. For example, if you rent a brick-and-mortar office space, they will be higher versus if you go the route of a virtual office.
- Insurance: Insurance is another expense that may vary depending on the industry you operate in. Regardless of that fact, insurance is a necessary expense to protect your business from litigation and unforeseen circumstances. Many states within the U.S. require companies to have workman’s comp. insurance, while other industries require a more comprehensive policy approach. Nevertheless, insurance is a hefty expense that should be accounted for when budgeting for your new business.
- Consultant Fees: Hiring a consultant as a start-up, can seem costly. But the expertise they bring to the table can be invaluable and worth the upfront expense. Many companies value consultants more than full-time employees as they get very specific expertise at a fraction of the cost of hiring a full-time expert. In fact, a recent study found that out of 100 start-ups, 3/4 of them partitioned up to 5% of their budget for consultant fees.
Opus Virtual Offices
Opus Virtual Offices is a B2B provider of virtual office services to businesses across the U.S. & Canada. Competitively priced, Opus VO offers many services that set them apart from the competition. Services that will help you run your business efficiently while saving you money on administrative staff, and physical space, such as live reception, inbound/outbound call transfer, call log, and digital mail sort. When you’re ready to take the next step in your new business, think of Opus VO!
Posted on May 31, 2023 by Melanie Rauch