How much you spend on a startup depends on the kind of business you’re going to build. Building a traditional small business costs on average $30,000.
Some startups could cost as much as a house or more. And you know you’re going to spend money, but do you know where you’re going to spend money?
Startups are like home improvement projects. You start out thinking the project will cost you $5,000, but halfway through something crawls out of the woodwork and you have to spend another $1,000.
Today we’re going to layout the hidden costs of building a startup. Keep scrolling to find out.
1. Office Space Will Cost More Than You Think
Unless you’re a solopreneur, you must provide your employees a space to work. And this doesn’t mean your mom’s couch.
This doesn’t mean going out and buying a building. It may not even mean renting an entire office.
If you’re trying to find an alternative, look into corporate offices who might have a spare workspace. They might rent the space for a fraction of the cost.
Another option might be a coworking space. These spaces come already set up with desks and screens. Sometimes they’ll even provide free beer!
Either way, plan on spending at least $100 per employee per month for office space.
2. Incorporation Fees
Are you going to incorporate your business? It’s often wise to create a limited liability for any service or product-oriented business. It protects you from the liquidation of your personal assets if your business gets sued.
Incorporating your business means filing articles of incorporation for your business. This could come with a price tag of up to $300.
Even if you decide not to incorporate, you will likely need to apply for state or federal licenses or permits just to operate. What kind you need depends on the type of business you’re starting up. Some require federal. This would include any agricultural businesses.
3. Equipment Is Often the Biggest Cost
You’re researching a common piece of equipment, such as a printer. You’re shocked to discover you’ll likely spend up to $200 on a printer!
Every business needs equipment. No matter if you’re a multi-billion dollar corporation, a niche business that requires specific equipment, and a small startup that only requires a printer.
Equipment is by far one of the biggest expenses a business requires. Equipment, parts, and maintenance can easily set a business back at least several hundred dollars.
Don’t worry, there are ways to save. If you need many pieces of equipment, do some research and find bulk deals.
You can also opt for used equipment instead of new. But you should always survey the age and performance of used equipment before purchasing.
4. Wages and Benefits
You’ll eventually need to hire employees if you haven’t already. And you’ll want the most talented staff to help your business grow.
However, talented and reliable employees aren’t cheap. The average worker expects a livable wage, whether they prefer salary or hourly pay. It’s also important to provide benefits such as health insurance and paid time off.
All of these expenses can leave a serious dent in your pocket. But they don’t have to if you don’t thoroughly research wages and budget for benefits.
Always research the average wages for an employee, based on their decision. Glassdoor offers a comprehensive salary guide for employers.
If they try and negotiate higher pay, see if your budget and their experience justifies the higher pay.
Next, you’ll want to budget for benefits. There are plenty of benefit packages available to help you save money. These packages typically include health coverage, life insurance, and a retirement plan.
Some businesses take benefits a step further, offering additional perks such as a free gym membership and free meals at work. These are optional but will improve your employee retention.
No business should forget paid time off. While it’s important to offer vacation time and sick days off for your staff, understand that lost staff time can mean losing money.
What if you don’t offer benefits, to save money?
While you may not have the budget for benefits now, plan to offer benefits soon. If you don’t, you could lose a valuable employee to a competitor who offers a comprehensive benefits package.
5. Theft and Cybercrime
Unfortunately, bad guys target startups and small businesses.
13% of small businesses are crime victims. Even though small businesses don’t have the capital of major corporations, they also don’t have security measures set in place.
Small businesses should especially be careful on digital platforms.
Half of the cyber attacks and cybercriminals target small businesses. Savvy hackers can compromise your data and hold it for ransom, a tactic called ransomware.
Don’t wait until an attack occurs to invest in cybersecurity. There are many firms you can outsource to protect your business.
If you own a brick-and-mortar store, theft is still a major concern you shouldn’t take lightly.
Criminals posing as customers can steal your inventory, you could be held up for a robbery, and even your staff may steal from the cash register.
To catch these attacks in action, invest in a security camera system. Educate your staff on employee theft and train them to catch thieves in action.
6. Office and Digital Supplies
Even in the digital age, it’s still necessary to invest in basic office supplies. These include pens, pencils, and paper. You can easily reduce these costs by converting as much of your processes to a digital medium.
While digital processes can help save time (and the trees), it’s easy to invest in expensive programs. Try and find free and cheap platforms.
Google is a perfect example. A Google account is free and you can use documents, spreadsheets, email, Drive and even YouTube. If you need more storage, you can upgrade your plan for only a few dollars a month.
Don’t Lose Too Much Money On These Business Expenses
In order to keep your business financially healthy, you need a steady income stream and to spend less than what you generate. However, these essential startup costs can eat away at your budget.
Plan these expenses beforehand and always find cheap and even free alternatives.
Are you ready to start your business, but not sure which business to start? Here are profitable side business ideas to get you going!