Most people decide on entrepreneurship over working for the Man for one of two reasons that are often combined together:
- More money.
- More freedom.
You may feel your reason for venturing out on your own is different, such as making the world a better place, but one or both the above will likely be the underlying theme in your decision.
There are a number of expenses that surprise first time entrepreneurs as they start to research costs and later launch a new enterprise. And each can put a serious damper on your main goal in running your own business.
While most entrepreneurs are expecting to pay high rental/leasing costs for a great location, and all will know that utilities and advertising costs will certainly be high. But, it’s those nagging little costs that keep popping up that can really eat into your bottom line if you’re not budgeting properly for them.
Some, like licenses, permits and taxes at the Federal and local level, can really put a hurt on your startup and operational funds. Others, such as domain registration, hosting, promo items, insurance, and other “cost of doing business” expenses can range from a minor annoyance, to the need to make an appointment with your bank or investors in order to secure more funds!
Continue reading to learn more about these expenses and their impact on your check book.
6. Yearly Domain Reg Fees
In order to keep a company website going, you’ll need to purchase and maintain a domain name; many of you will need several if you run a business that requires different domain names for different products and/or services. A dotcom extension is still considered the best and most reliable for long-term branding, but there are a number to choose from.
Dotcoms (.com) range from $10 – 15 per year, but can get more expensive from one registrar to the next, who claim to offer stiffer Whois protection (among other supposed benefits) to justify higher costs. This protection might be something that matters to your business and personal reputation, if you make money online (or off) using sketchy and/or embarrassing methods.
Legitimate businesses won’t require Whois at all, so stick with what’s most identifiable; either a dotcom, or country specific domain for around double the cost. Most registrars offer discounts if you renew 2 years or more in advance. Alternatively, you can always visit discount coupon sites for deals.
5. Web Hosting and Internet
Even if you sell stuff on Etsy, Shopify, or the like, you’re still paying hosting costs. And probably a lot more than if you were maintaining it on your own hosting account, but there are other advantages to using an ecommerce provider too.
Hosting can be had for as cheap as $3 a month, particularly if you’re willing to pay a year or two upfront. However, if you take your business and web traffic seriously, you’ll likely opt for something in the $10 – 100/month range like GoDaddy’s Ultimate Package or a pricier dedicated hosting package from a company like Rackspace or another high-end outfit.
Then there’s the Internet. We all need Internet access to run our businesses and for off-hour’s entertainment. Whether you’re using the data on your phone plan or a local ISP, reliable and fast Internet comes at a cost and that cost will surely rise on a yearly basis, if the current pricing landscape is any indication!
4. Promotional/Educational Products
Anything that needs to be prepared to educate your customers and staff will have an expense attached to it. From menu-style mailers to attract business, to step-by-step instructions to teach employees how best to do their jobs. Then there’s having educators and consultants of all kinds coming in to train employees new skills, and any expenses you personally may need to incur to learn new skills or brush up on best practices you want to integrate into your business.
Consider not just costs of time and/or labor to get these things prepared, what about the outsourcing you’ll need at some point. For instance, laminating a single standard sheet of paper at Staples cost over $2 a sheet. These expenses really add up quickly! Even 500 basic business cards prepared professionally can cost $20 or more at a time.
3. Office Supplies
If you don’t have an office outside your home, you can rejoice a little. Even working from home still requires pricey office essentials such as a desk, quality chair, computer, monitor, ergonomic keyboard and mouse – at minimum. Then there are organizers, stationary, pens, pencils and the like.
When you’re running a full-on office complete with employees, everything deemed as “required” or “desired” in the office counts in this expense category. Those expenses include not just those mentioned above, but also high-end coffee makers and those expensive little discs that go in them. Then there are microwaves, ovens, bottled drinks, creamers, etc.
Then, whomever you’re paying to clean the office is also a supply service needed to keep the office orderly and running smoothly.
Remember, everything you supply inside that office is an office supply. Newbie business owners often waste big bucks on outfitting their office and insuring their employees have not just what they need, but also that which they want.
2. Entertainment Costs
Your business model may not require that you wine and dine your clients, suppliers, lawyers, etc. But when a sales environment is present, the likelihood is that you will – whether you know it from the getgo or not! This expense will certainly surprise you.
Sure, a cup of coffee at Starbucks isn’t too bad once in a while. What if it’s a few a week, or several? Then there’s transportation expenses going back and forth between meetings, conference rooms, catering events (including office parties), and many others.
Worse, many first timers don’t think to add an entertainment column to their ledger until their entire budget’s been blown and big damage has already been done.
If you live in the states, you can search for this information on SBA.gov (see Canada, UK) or go to your local registrar’s office. The examples listed in the next paragraph won’t apply to all business types. Still, even legitimizing an online freelancing or affiliate marketing venture run out of your home will require registration at the state and provincial level, as well as the locale you run the business out of.
The upfront expenses will vary from the hundreds to thousands of dollars, depending. This expense category is certainly the most shocking for first time entrepreneurs, particularly those who run a brick-and-mortar operation.
A quick search in California led to a host of different licenses and permits one would need to open a restaurant including a: local Business Tax Certificate, Land Use Permit, Fictitious Business Name (if your real surname isn’t used in the business name), CUPA Certification, Weights and Measures Permit, Permit to Operate, Alcoholic Beverage License, Alcohol Beverage Tax, Company and Partnership Filings, and on, and on…
In total, well over 20 licenses and permits are required to run a restaurant in the state of California. Don’t expect your state or province to be any different!
The surest way to avoid being overly surprised by all those little expenses that will pop up your first time as an entrepreneur, is to do lots of research ahead of time and by finding an experienced mentor that can help ease your transition to a fully-fledged business owner.
While the expenses mentioned on this page can indeed be a burden, understanding what you need and what you don’t, will always be your best ally.