The cost of doing business every owner wished they knew earlier

August 19, 2021

Hidden cost of doing business

Starting a business is not a piece of cake, and we know it, but it doesn’t have to be total chaos as well. Being realistic and aware of as many insights as possible will definitely be a big push when entering the business world.

You think you have done your research about the cost of doing business and you calculated the rent costs, buying equipment, paying salary, etc, but there are costs of doing business that don’t go by the book. That’s when asking business owners to share their experience comes in.

9 most (un)expected costs of doing business

In order to avoid any financial surprise, we’ve asked business owners who already went down that road to share the cost of doing business they wish they knew earlier. 

Inefficient employees

Running a business is challenging in so many ways and a successful business will adapt to needs and the changing landscape of the world. The biggest cost that a new business owner needs to be aware of is that of inefficient employees. Not only do they have economic impacts but they can be cancerous within the culture of a business. Not only would you waste money on paying that employee, but they can also contribute to poor morale that ultimately can be a detriment to the entire business and drive away from a great talent.

Omid Torkian, CEO at Shipbots

Having a website

As a small business owner, I used an online resource to map out the cost of all of my expenses so that I knew what to budget for and how to plan overall. New business owners should be aware of the cost of having a website. In order to have your own domain and use important features that your service has, it is going to cost you monthly payments. If you’re not good with computers or technology, you might also have to hire someone to create your website for you.

Andre Kazimierski, CEO of Improovy

Taxes

The one cost that I would recommend any new business owner lookout for is taxes. If someone has never owned a company before, they might not be aware of all the different taxes and how much they can end up costing them from year to year. That being said, you should check with your respective state or country’s department of labor about all the tax matters related to your specific location and situation.

They will be able to provide detailed information about what kind of income tax concerns are relevant to your business situation. Entrepreneurs should also have an accountant that specializes in their field of business so that they know all of the rules to keep you legal and to save you the most money.

Jamie Hickey, Founder of Coffee Semantics

Regulatory and insurance costs

The simplest thing that new business owners can do to accurately calculate their cost of doing business is to create separate financial accounts for your business (checking account, credit card, etc.) and use them exclusively for all of their business expenses. This will take the essential first step of keeping all business expenses in one place.

My next piece of advice is to be aware of regulatory and insurance costs related to starting a new business. It can be easy to overlook these expenses in favor of focusing on supplies, rent, labor, and other more concrete costs, but these things are essential to starting a business and can be quite costly depending on your industry and regulatory environment.

Devon Fata, CEO at Pixoul

Small business loans

As an expert in debt consolidation, I can confidently say that the long-term costs of small business loans are an important expense for entrepreneurs to consider. Often, people have a vision for a business and will focus on making that vision a reality at the expense of doing it in a

financially sound way. It’s best to avoid small business loans as much as possible in favor of scaling up slowly, seeking investors, and keeping costs down until revenue starts coming in.

Carter Seuthe, CEO at Credit Summit

Marketing

I calculated my cost of doing business by determining what I would be willing to spend out of pocket before establishing a steady revenue stream. I would advise new business owners to be aware of marketing expenses.

Marketing can include social media advertising, website creation, graphic design platforms, and even apparel. Individually, each is not very expensive. However, when you use multiple advertising sources, the costs can add up and not provide the desired results, income generation. Therefore calculating these costs upfront and making sure you get the most out of the advertising budget is imperative.

Annette Harris, Founder of Harris Financial Coaching

Hiring and training employees

I started by plotting out a hypothetical full month of operations. This made it easier to visualize all aspects of the business and helped me identify some costs of doing business I’d been ignoring in my initial operating budgets.

Hiring employees and training. That’s an easy one to ignore because it’s not a regular expense and it’s difficult to plan for, but it’s also one of the most significant employee-related expenses for a business. You should know what it will cost to replace each position in your company, even if you think your employees are committed for the long term. Even the best-run business has some amount of turnover so it’s unrealistic to expect you won’t need to hire.

Michael Moran, Owner of Green Lion Search Group

Equipment failure

I actually hired professionals to help me calculate the cost of doing business since I was still new in the process and unfamiliar with all of the expenses. The process took a while but I ended up with a rather realistic estimate. One of the most unexpected costs was equipment failure. So, when in doubt whether you should buy or lease equipment, I say you focus on being prepared for equipment failure.

I calculated how much it would cost me to initially purchase tech equipment but a lot of it needed repairs or replacements after a short period of time and this cost quite a bit of money. I would suggest to business owners to always set aside a small budget for these unexpected technical costs since they happen more often than not.

Navarre Trousselot, CEO at Navexa

License costs

I compartmentalize these as government or industry costs like business licenses, tax, or fixed operating costs such as working space lease. Businesses should especially be aware of their license costs. Some licenses are subjected to annual reviews to ensure businesses are still adhering to

standards and best practices, which can sometimes mean incurring renewal and training expenses as part of the renewal process.

Ian B., President of Kredmo

Conclusion

Don’t start your business before you make sure you analyzed all your costs. Determine what costs are possible to minimize, which costs are a must and which are potential costs that can harm your workflow. Being a good boss means being prepared to respond accordingly to every scenario. Therefore, the priceless but biggest cost of doing business is taking risks and always being awake to predict potential problems before they lead to a disaster.

More must-read stories from Enterprise League:

  • Find out why is customer data crucial for business growth and how to have data protection.

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