7 Hidden Startup Costs to Watch Out For

When making a plan to bring your business idea to fruition, it’s critical to consider your startup costs. 

Your budget needs to reflect the actual costs of your venture, whether you’re just starting or looking for a growth spurt. Hidden startup costs are among the most prominent reasons startups underperform. 

Let’s look at 7 of the most common hidden startup costs requiring close attention while building a business.

1. Marketing and Advertising

Marketing and advertising vary widely based on your marketing and customer acquisition strategies. As a startup without historical data, accurately predicting how much you should plan for marketing and advertising can be a real challenge. 

Since these costs are closely tied to reaching new customers and achieving growth, it is often better to overestimate these expenses when building your marketing plan; this leaves a much-needed margin for error.

2. Employee Benefits and Costs

The cost of hiring and maintaining a team may be the most significant single expense faced by new businesses. To score top talent, it’s often not enough to have an exciting environment; you need to offer competitive compensation. 

In addition to salaries and mandatory taxes, companies are often responsible for other benefits such as: 

• Health insurance
• Paid time off
• Retirement plans

Planning for these costs can set accurate expectations and avoid surprises.

3. Taxes

Tax time can sneak up on startup owners and entrepreneurs. As a result, you may not be aware of the amount of taxes you owe until you’re slapped with a hefty bill and can’t pay it. 

In addition to employee taxes like social security, medicare, and unemployment – federal, state, and sometimes local governments want their fair share. 

You can use credits and deductions to limit your obligations, but you’ll likely still have to pay something. The federal government requires most businesses to file (and pay) quarterly estimated taxes based on an estimate of what you earn in a given year.

Working with an experienced CPA will help you get the best cost estimate in this area and ensure you’re maximizing the use of credits and deductions.

4. Administrative Costs

General office or building upkeep can be expensive. Whether renting or buying, you might not realize how much maintenance costs can add up over time. On top of considering utility costs, including electricity, water, heating, and air conditioning, don’t forget to plan to maintain facilities and equipment.

Further, you might also need a regular replacement for specialized equipment or tools, including: 

• Computers
• Printers
• Pens
• And more.

And in the age of technology, you’ll need updated versions of everything from basic office supplies to computers and software programs.

These things always seem to add up, especially when you’re stocking an office for the first time.

5. Shrinkage

While most common in retail, shrinkage can affect any business. It’s the mysterious disappearance of inventory, money, or other assets. Whether accidental or deliberate, it hurts your bottom line either way.

Theft is a significant cause of shrinkage, but it’s not the only cause. Errors in accounting, pricing, or product orders can lead to shrinkage. So can damage from accidents, weather, or pests, and mitigating them is a challenge.

6. Employee Education and Training

Like many aspects of business, employee education and training are necessary expenses but can cost you more time and money than you think.

Ongoing employee education and training is a regular expense that many businesses overlook when they’re starting. Entrepreneurs are sometimes more concerned with the up-front hiring costs than the ongoing cost of keeping employees happy and productive.

Your business is only as good as the strength of your employees. You’ll spend a lot of time hiring and training new employees, and you might also spend loads of time together. It’s important to hire right the first time around.  

7. License and Permits

It’s easy to forget that there are rules and regulations to follow when you’re excited about starting a new business, especially your first time around. How much it will cost depends on the type of business, location, and if you’re mainly online or in-person.

There are licenses, permits, registrations, and certifications required by the city, state, county, or country to consider. These can range widely in price, so be sure to work through precisely what you’ll need for your business.

Don’t Be Caught with Unexpected Startup Costs

There are many oft-neglected hidden costs. The costs can add up between salaries, permits, inventories, and taxes. It’s essential to plan your budget and stay within it, focusing on spending where it counts. 

Founder’s CPA can help you plan and control these hidden startup costs to get you ahead of the curve and ensure strong cash flow. Contact our startup accounting experts if it’s time for a professional consultation to keep your costs under control.