Startups are a great way for entrepreneurs to capitalize on developing a product or service relevant to a large market.
These types of small businesses are designed to grow fast but, if not properly planned, can easily fail and cause financial hardship for those involved.
Mitigating the risks of failure involves understanding the costs involved in getting a startup off the ground.
While some costs seem blatantly obvious, others are a bit more unexpected. Here are 4 examples of unexpected costs involved in beginning a startup:
1. Advertising and Marketing
In order to attract clients, customers and income, your business will need to be promoted.
An unexpected cost may include paying to have ads placed in local publications or online.
While advertising is a good way to let the world know your business exists, marketing focuses on attracting customers and clients to your business. This is often done through blogs, blog posts, videos and social media.
If you have the time to accomplish all this, you can certainly advertise and market on a shoestring budget. Otherwise, to save yourself the time to focus on your business, you may want to hire a third party to complete these tasks for you.
2. Inventory Management Systems
Businesses that operate by selling goods and products to customers will often suffer financial loss due to shrinkage.
Shrinkage occurs when inventory is lost between the time of purchase from the supplier and purchase by the customer.
It is usually caused by short shipments from the vendor, damaged goods or theft.
To prevent financial loss due to shrinkage, it is best to invest in an inventory management system that utilizes barcodes and scanners to minimize shrinkage and better track inventory.
3. Permits and Licenses
Depending upon the area in which you plan on conducting your business, you may be required to purchase specific permits and licenses.
Since this based on local law, you may want to check with local business groups to determine which permits and licenses are required.
If you are obligated to purchase any permits or license, they typically need to be renewed annually and do not involve a one-time fee.
4. Business Insurance
When you begin a business, having insurance may seem like an obvious fact. However, there are specific policies you may need in order to protect your business.
Apart from protecting your space, inventory and equipment, you may need additional liability insurance to cover injuries involving employees or third party individuals such as clients and customers.
Full business insurance packages usually include protection for your business from disaster, theft and injuries.
However, you may need to consider additional policies such as cyber insurance (if you deal with computers and information technology) and worker’s compensation insurance if you have full-time employees.
As your business progresses, other unexpected costs are likely to land in your lap.
For example, if you run a commercial or office cleaning business, you will have to factor in the cost of replacing supplies such as cleaners and equipment such as mops and brooms.
Offices have to consider restocking paper, pens and other necessary supplies.
The success of any new business relies on the preparedness of those involved in its beginnings.
Put your startup on the road to success by taking into consideration all the costs involved in making it happen.