You’ve made a business plan, hired staff, bought inventory and made sales. Everything’s going great…until the unexpected costs show up.
Avoid the surprises by planning for the eventuality of these 12 hidden costs.
1. Employee Perks
“Whether you have 5 or 500 people on your staff, there are several employee expenses that must be taken into account when running a small business. You’ve probably already factored in the big things such as salaries, payroll taxes, benefits, and retirement plans. What you may not realize is that there are many more smaller expenses that quickly add up, such as:
- Paid vacation time, sick leave and maternity leave
- Certifications, classes, conferences and training
- Office perks like ergonomic seating or Friday afternoon pizza parties
- Employee turnover costs including hiring and training new employees” – Hiveage
“Failing to invest properly in your employees, providing a living wage, a clean environment, office perks and other benefits can lead to high employee turnover. Furthermore, it costs about one-fifth of a worker’s salary to replace that person when they leave. In some industries that cost is even higher.
“Provide perks. It’s more cost-effective to retain good employees than recruit new ones. These perks don’t have to be pricey; benefits such as flexible schedules, telecommuting and casual dress codes can do a lot to boost retention.
It’s also a good idea to negotiate annually with your health insurance provider so you can better budget for premium costs and other fees.” – Wasp Buzz
3. Administrative Costs
“Unless you are running your business out of your home, you need to consider where it will be located. Most people anticipate a rent or mortgage when they choose to buy or rent office space, but once you have that space you still have utilities (gas, a/c, electric, water, internet, phone services, etc.) to plan for.
“If you plan on having any humans work in your office, that also means you need to buy toilet tissue, soap, paper towels, plates, cup, refrigerator, desk, chairs, file cabinets, etc. Another expense to keep in mind is the cost of technology your business will need. That means computers, phones, printers, papers, scanners, fax machines, software for your computers, hardware to store the information, website development and maintenance, and IT consulting (whether in house or out sourced).” – Branding Beat
4. Phone and Internet Bills
These may be within a predictable range if you’re a one-person business, but once you add employees the costs can skyrocket. Make sure you negotiate group plans and data sharing, or unlimited data where available.
“But having to pay hundreds per month for a full-service cell phone, with the e-mail, text, and web browsing services you need to keep in touch with your clients out of the office can really add up. In the private employer market, many companies pick up the tab for things like cell phones. But entrepreneurs are on their own.
“Tip: look into your cell phone provider’s service plans. It’s worth an hour to go over every line item with your carrier, and knock that cost down as much as possible. Even so, a good smart phone can cost up to $200, along with $100 or so in monthly charges for all the bells and whistles.” – Main Street
Read Related: 3 biggest financial challenges facing small businesses
5. Legal Fees
“You never know what’s going to happen. Small businesses are the biggest victims of frivolous lawsuits, according to the NFIB. Bogus and legitimate lawsuits cost small business owners in many ways:
- Settlement costs. While the NFIB reports that settlements are often less than $5,000, they total $35.6 billion annually for small businesses in the U.S.
- Higher insurance costs. After being victimized by bogus lawsuits, liability coverage premiums likely increase.
- Lost opportunity. The time and attention that owners devote to lawsuits means time and attention not spent on running their businesses.” – Small Business Trends
6. Professional Services
“Legal and accounting fees can run into thousands of dollars annually, but these specialists can save you money and time. Legal professionals can untangle red tape. Accounting specialists can translate tax codes, help maintain accurate payment and inventory records, and find grants to help fund your endeavors.
“Negotiate with these professionals to keep fees manageable. You need the CPA or lawyer to do the heavy lifting that merits higher fees, but other tasks can easily be done (and billed to) their less-expensive support staff. Some professionals and university programs may also offer pro-bono or discounted rates for advice or other services; it never hurts to ask.” – Wasp Buzz
7. Industry & Association Fees
“When starting up as a small business, it really helps to be connected. A great way to do this is by linking up with a trade association specific to your chosen industry. Keep in mind, however, that membership to these associations can be costly (upwards of hundreds of dollars for annual fees for membership), so try to be as selective as possible. Hopefully you will join one with loads of potential clients and try to keep the cost down by asking other members other good groups to join.” – Branding Beat
8. Equipment Repairs & Replacements
“Things break, and if you still need the equipment, you’ll have to repair or replace them. The cost of repairs can be pricey, with sole proprietors (Schedule C filers) paying more than $16.7 billion in 2012. Annual maintenance costs to keep equipment in good running condition should be an ongoing expense to avoid the higher costs of repairs or buying new equipment to replace the old.” – Small Business Trends
Heating and electricity costs seem straightforward to some businesses, but they can also be unpredictable. If you’re in manufacturing, for example, or have electricity-heavy requirements in-office, like computer equipment, you’re utility bill could jump up.
“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 really be especially costly for operations in extreme weather zones.” – B Plans
10. Online Payment Processors
“Did you know that some payment processors are in the habit of hiding certain fees? If your customers use premium/reward cards or your company doesn’t meet minimum monthly transactions, you could be shelling out more in payment fees than you bargained for.…
- Some processors charge higher rates, up to 3.9%, for the premium cards that your customers prefer. Say your customer wants to use their frequent flyer or corporate card; you may get hit with a different rate vs. the originally advertised 1.9%.
- Some processors don’t disclose what their monthly minimum process requirement or fees are. These fees can typically run $20-$35 per month if you don’t meet the minimum transaction volume. That means you’ll be penalized if you don’t meet a volume target.
- Some processors charge a monthly statement fee, whether or not you are mailed a paper statement.
- Finally, if you opt to cancel once you recover from the sticker shock of that first bill, you can be hit with a huge cancellation fee because you signed a multi-year agreement to get that “great deal.”” – PayPal
11. Growth Opportunities
“Most, if not all, business owners dream of growing their business empire. Often, this takes strategic expansion plans, but sometimes a growth opportunity may present itself unannounced. In order to capitalize on these opportunities, it is not uncommon for your business to require a sudden influx of capital. While I don’t advise you to account for this in your budget, it is important to be aware of ways in which you could secure business financing in case an opportunity presents itself.” – Under 30 CEO
Time may not be a direct cost, but it’s an opportunity cost and the adage is true…time is money!
“Eric Allen [co-founder of consulting company Admit Advantage] agrees that time is a casualty of starting a business, and it can do more than eat up the hours you’d rather be doing cool work stuff. It can also spill into your personal life.
“ »Opportunity cost is the cost that you’re giving up while choosing to do something else. I learned the concept in business school, but I didn’t realize it would include disappointed children, angry wives and annoyed business partners, » Allen says. « There is a significant physical and emotional cost of starting a business. It’s hard. That’s why most people fail. »” – Business Insider