Starting up a new business can be exciting, but developing a business plan that has an accurate budget can be a daunting task.
A good rule of thumb is to calculate your first year budget as accurately as possible in your business plan and then add an additional 20% onto this amount. You’ll be able to use this money on unexpected expenses that will undoubtedly pop up throughout the year.
Some hidden startup costs to consider often include the following:
1. Licensing Fees
A number of different considerations could affect your business licensing fees, such as federal industry regulations or other local policies that pertain to your profession. The physical location of an enterprise and the number of different jurisdictions in which it conducts business also affect how much government agencies charge for a business license. For example, a mortgage company could pay different licensing fees based on the city, county or state in which it plans to do business. But if it wants to operate nationwide on an online platform, it must provide a business license to issue mortgages in all 50 states — which means paying a significant amount of money toward licensing fees.
2. Surety Bonds
Government agencies require the use of surety bonds in a number of different industries, especially those that offer services to consumers. Surety bond regulations are put in place to keep unqualified professionals from accessing certain markets, thus deterring unethical business practices. Unfortunately, new business owners might not realize they even need a surety bond until they’re in the middle of the licensing process. After applying for a bond, business owners might find themselves needing to pay a premium that could cost anywhere from $100 to $20,000. The actual surety bond quote will depend on how much bond coverage a business needs combined with the owner’s (or owners’) credit score. Fortunately, many surety bond providers offer financing for business owners who aren’t able to pay for the full premium upfront.
3. Professional Fees
Whether you’re a new business owner or a seasoned professional opening a new enterprise, finding the right professional help from the get-go is a must. Hiring an accountant to manage your finances and prepare your taxes is usually a better idea than trying to keep track yourself unless you plan to run an extremely small operation. Finding a lawyer that has experience in your industry can also prove beneficial. Although finding professionals can result in unexpected costs for your start-up, doing so will save you time, money and headaches later on.
4. Technology Costs
No matter what line of business you’re in, chances are that you’re going to have to pay for a decent amount of upfront technology costs. You’ve probably already considered how using technology can help you manage your business more efficiently. Depending on the nature of your business, you might need:
- Computers so your employees can correspond with clients
- Cell phones to keep track of traveling employees
- Custom data entry software that allows you to process orders quickly
Unfortunately, these conveniences don’t come without a price, and they can take business owners off-guard when they realize technological costs have to be added for each new employee who will work for the company.
Paying for utilities could cost a significant amount of money for business owners, especially those who are looking to open a large scale operation with multiple employees. Large facilities not only require more lighting, but also more heat and air conditioning costs, which could be especially costly for operations in extreme weather zones.