Article Contributed by Dennis Hung
Starting a business is a noble venture, and regardless of how much advice you’ve received from experienced entrepreneurs, friends or family members, there will always be expenses that pop up when you least expect it. If the financial and budgeting aspect of your startup isn’t managed properly in the beginning and you’re working on a budget with no room left for errors, some of these mistakes could cost you your entire company.
The following 5 hidden expenses should be considered by every first-time entrepreneur.
1. The Biggest Expense: Idea Time
So you have this wonderful idea about inventing a new product or you want to offer a specialized service to local businesses, but you haven’t quite found the core business focus that you’ve been looking for.
This is a natural process for every startup. While you probably have a great idea in your mind, it takes at least one to two years of solid work, research and brainstorming to come up with a valid business and revenue model, and a solid value proposition that you can sell to potential clients. Make sure you have enough in the bank to support yourself for at least the first two years.
2. Additional Server and Website Costs
If you plan on scaling your business, you should always keep in mind that large web traffic amounts need additional server space. A shared hosting space won’t cut it, especially if you’re looking to build a business on hundreds of thousands of website visitors per day. Be prepared to pay $1,000 or more per month for a dedicated server or virtual private server.
3. Administrative Expenses
There are hundreds of daily processes that must be completed so that a business can run smoothly, and you likely didn’t think about them when you first decided to start your own company.
As the head of your own startup, you have enough on your plate to deal with, from taking care of tax paperwork and government forms to sending emails, attending meetings, raising capital and more. Hire a part time assistant to do all the mundane business tasks for you, such as writing correspondence, ordering supplies and speaking with individuals who want to sell you something.
4. Expenses for Additional Warehouse Equipment
If you plan on starting an e-commerce business that plans on shipping large quantities of items, it’s very important that you prepare for an overwhelming amount of orders.
Whether you want to sell books, shoes, clothing or food products, purchase the necessary conveyor systems to make the packaging shipping process much easier. Before your website really takes off, hire one or two more employees to act as warehouse workers, if you can afford it.
For many new businesses, it’s also important to have a company vehicle. Make sure you choose an affordable and reliable that will last for years to come.
5. Marketing and Market Research
Market research is an essential step to forming a startup. Double check and triple check your competitors regarding their services, pricing. If there is someone who doing the same thing as you, then you know it’s trouble and you can mitigate risk in the beginning by altering your product or service.
One of the biggest mistakes new entrepreneurs make is the failure to accurately advertise themselves in the beginning. Depending on the competitive nature of your company’s product category, you could be looking at tens thousands of dollars per month or more for PR help, written content, search engine optimization and more. If you have the cash, carefully budget the initial few months after your business opens its doors.
Simply put, failure to budget accordingly and failure to plan for unforeseen expenses will land you out on the street. Obsessively research other startups and see what type of expenses they’ve occurred over during their first few years to get a good feel of what you need for your company.
About the Author
Dennis Hung is an entrepreneur and product analyst specializing in mobile technology and IoT. He’s spent most of his career consulting for businesses in North America.