We all know the importance of implementing an effective budget and staying within its means in order to achieve success and embrace our bottom line. When budgeting for our startup, there are many challenges, and more importantly, some overlooked line items that can have our new business seeing red. These unexpected costs can bankrupt a startup before it has had a fair chance for survival.
In a world where 80% of businesses fail in the first two years of launching, making a rock solid budget is vital. Here are five of the most commonly overlooked items missing from a startup budget:
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#1 – New and different types of employee benefits and taxes
Anyone who has ever made payroll is aware of the many taxes, fees and benefit costs that arrive on payday. But we often forget that the government may institute new regulations that can affect payroll as they did with the passing of the Affordable Healthcare Act (also known as ObamaCare). This initiative had businesses scrambling to understand their responsibilities and costs associated with this new law.
Come election time, still other codes or initiatives could create new tax rates or change existing payroll contributions. These changes could have a drastic effect on our existing budget.
#2 – Additional types of equipment costs
New office equipment and furniture are standard notes when orchestrating a new startup budget, but there are often hidden costs that hit us before opening the doorway to our new workplace. Brokers fees are usually paid by the building itself, but sometimes they are not.
We all know to put away funds for purchasing computers, but sometimes other associated costs are forgotten. Electrical rewiring, networking, routers and internet connectivity are also often sometimes necessary.
#3 – Other forms of insurance coverage
Property insurance is usually the responsibility of the office owner, but almost always they are not liable for your equipment and personal possessions. If the building goes up in smoke, they are covered and perhaps you are not.
There are cases where there is necessary insurance coverage that the business owner was previously unaware of such as protecting board members from lawsuits or founder’s life insurance policies. These yearly rates could easy hit $10,000 to $20,000 or more. This can quickly squelch your dreams of business wealth before you even get started.
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#4 – Protecting your trademarks and domains
Budgeting for legal fees can include partnership agreements or corporation formation expenses, but lurking in the shadows are other hidden costs. Your valuable brand may need to be protected by trademarking or copyright costs which can quickly climb into the thousands.
Once you have acquired the perfect domain for your website, you may need to gather up other extensions on your URL to ensure another businesses aren’t pulling away potential customers. This is another expense that can add thousands to your yearly budget.
#5 – Software costs after startup
In the good old days, software was purchased on a disc and could be installed and used on a number of different computers for many years to come. In the same way Windows continues to upgrade their operating systems making the older versions obsolete, software vendors have joined this practice.
Accounting software is a perfect example of how fees continue long after the purchase is made. Yearly (or monthly) charges include possible installation, providing support and upgrades that reflect tax changes and rate differentials. These fees should be reflected in the startup budget.
Even the most carefully planned-out and well-executed budget creation can fall short of expectations. We don’t plan to fail, but without the correct formula for startup success, we could easily become victims of unforeseen costs and drown in a sea of debt.
Guest article by Dave Landry
