Don’t Cheapskate These 8 Critical Startup Costs

Gary Stevens
  • Sep 18, 2018
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Business Startup Costs You Need to Consider

Before you buy the first thing for your startup business, sit down with pencil and paper (or keyboard and fingers) and create a list of what you want, need, and absolutely must have. As you go through this process, you will hopefully realize maybe you don’t need that super swanky office chair or top of the line MacBook Pro before you spend money on professional graphics or flesh out the marketing budget.

The bottom line is that there are some costs, as a newbie startup entrepreneur, you can put off until later – or never – and some you skimp on at your own peril. In other words…

Don’t Cheapskate These 8 Critical Startup Costs

#1. Promote or Die

We carefully chose to title this section with the more inclusive term of promotions rather than advertising. In most cases, a new business will not succeed unless it promotes itself heavily, and this means more than buying lots of ads in the local newspaper or radio spots. To promote is to use every means at your disposal to put your startup’s name and product into the brains and onto the lips of as many people as humanly possible, and do it quickly. The real point here is it’s dangerous to simply sit back and wait for customers to come. You need to find them and that costs time, effort, and money.

#2. Debt Costs

If you think you can get your business off the ground without borrowing, more power to you. Business loans should not be taken out on a whim, but if you decide to do it, calculate into your cash flow budget the monthly interest cost paid to the lending institution. Don’t get us wrong. Depending on the scope and type of business you’re starting, business debt may or may not come into play. It’s not automatically a bad or good thing. Keep in mind that a lot of very successful businesses got their start by borrowing money. Just remember to calculate ALL the costs.

#3. Employee Expenses – ALL of Them  

Unless you’re a one man or woman show or only want to have a hobby business, you’re going to encounter the necessity of hiring employees sooner or later – hopefully sooner. You should realize that the cost of hiring goes beyond the pay rate and includes things like benefits, taxes, uniforms…and the list goes on. If you plan to start your people at the minimum wage and keep them there, please reconsider. Low pay usually yields high turnover and disgruntled workers. That’s not an environment where you should want to spend your time.

#4. Technical Expenses

Back at the beginning of this article we urged you not to lay out crazy amounts of cash for a fancy laptop and fool yourself into thinking it was necessary. Now we’re to the point where we’re going to urge you to spend money on those technical considerations that are necessary to accomplish your business mission. That most likely includes a domain name and website, computers, as well as the critical service subscriptions or software (don’t forget accounting and payroll) you’re going to use daily. We’re going to suggest you not pay $90 million for a domain – see #14 on this infographic. At least not right away. Non-critical expenses are a startup killers!

#5. For Results, Look Like a Pro

While your oldest daughter might be a design wizard for her age – freshman in high school – but we’re talking about your business here and ‘good for a kid’ isn’t good enough. What we’re saying is that all those materials that represent your company’s face to the world – website, business cards, logo, signage, and the list goes on – should be created by a professional designer. Yes, this costs money than the extra $20 you planned to add onto her allowance. Once again, we’re talking about your business. Get serious about it.

#6. Professional Fees – Ughh

You probably don’t need to keep a lawyer on retainer or trot down to an accountant’s office twice daily to ask questions but buying a few hours of a well-compensated professional’s time in the planning stages of your startup is a great idea. An attorney can guide you through the legal maze of forming your company correctly, while an accountant offers invaluable advice in that area that no one likes to think about – taxes. With online payroll services becoming quite affordable, the daily chore of recording daily financial matters should be outsourced in most cases.

#7. Sock Something Away

We’ll call this one the Stage One Emergency Fund. In the early days of your capitalistic endeavor you absolutely must have money squirreled away somewhere to deal with unexpected developments. Let’s say you’re opening a seafood market and your main freezer (that you bought lightly used for more than you’d like to admit) conks out on day three. Hard to run that kind of business without a cold place to put product, so what are you going to do? Dig into that emergency stash and get the freezer repaired, that’s what. The point is not to spend ALL your money before you open the doors.

#8. Insurance and Other Maddening Costs

A single uninsured slip and fall or natural disaster can torpedo even the most carefully planned business. Insurance is expensive, yes, but it’s almost always cheaper than bankruptcy. Then there are the various permits and fees that may apply to your particular business (here’s where a consultation with a lawyer and accountant come in handy). You’ll likely need a tax ID number from the state and one or more local business licenses. If you dabble in alcohol or firearms, expect a VERY thorough vetting process that costs both time and money.  

A Final Thought

You’ve likely heard reference to the bottom line at some point. Smart entrepreneurs pay attention to the top line, which means you should continually evaluate prospective spending in light of whether or not it contributes to business growth and development. If it does, make it a priority. Otherwise, put it in the ‘maybe never’ pile. For a business to grow, you can’t be afraid to spend, just do so intelligently.

About the Author, Gary Stevens

Gary Stevens

Gary Stevens is a front end developer. He's a full time blockchain geek and a volunteer working for the Ethereum foundation as well as an active Github contributor.

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