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5 Expenses Small Business Owners Often Overlook

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Every business owner knows that in order to make money, you have to spend it. Typically you’ll have to spend more than you plan. However, small business owners often forget to plan for certain expenses that end up hurting their cash flow down the line.

Here are five expenses that small business owners typically overlook when doing their financial planning.

Legal and Incorporation Costs

Depending on the size of your expected operation, it’s common for business owners to incorporate their company. This gives you tax benefits as well as personal protection in the event that your business goes south. If you plan on expanding your business beyond yourself it’s probably a good idea to incorporate. That said, it’s very important that you take note of the costs associated with incorporating your business as well as on going legal fees.

When finding legal representation you should try and use as many free consultations as you can. Lawyers will typically give 30-minute free consultations in hopes that you’ll put them on retainer. This is often not enough time to get all your questions answered. Try and speak to three or four different lawyers before you settle with one. That way, you’ll have already saved up to a thousand or more before choosing legal council.

Employee Benefits Expenses

If you’re planning on having employees, you’ll likely need to provide them with more than just basic salaries at some point. Benefits like health insurance, retirement plans, and paid time off are typically expected. This can almost double the expected costs of your staff.

Even if you don’t expect to provide benefits off the bat it’s always a good idea to factor it in to your financial forecasting. It can cost a significant amount so better to be safe than sorry.

Insurance Expenses

It’s always a good idea to be optimistic in business because times will get tough. It’s an ever better idea to cover your ass(ets) when disaster strikes. Take a look at the six common types of small business insurance so you get a sense of which you may need to protect your company.  Business owners often don’t factor these in since they’re confident in their ability to handle issues when they arise. Don’t be naive. If you don’t think it’s necessary to purchase an insurance package up front, at least plan to once you start to scale.

Processing Fees

If you plan on accepting payments, either in-store or online you’ll be subject to processing and other related fees. Depending on which provider you go with, these fees can really add up. Try and look for an online payments solution that has flat per transaction fees. A flat transaction fee is typically a percentage taken directly out of each transaction. Some payment processors can charge various fees on top of that which can severely hurt your bottom line. By going with a flat fee, you can accurately predict what your processing costs will be based on your expected transaction volumes.

Software Tools

Before you know it you’ll need to start acquiring various software tools to support your business. Whether it’s an online invoicing platform or a CRM solution, you’ll want to factor these in to your expenses. Try and find solutions that offer tiered pricing so you the costs can scale with your business. Additionally, it’s always a good idea to avoid platforms that require annual contracts unless the product has measurable (as in it will pay for itself and more) value.

Final Thoughts

Financial forecasting is very difficult especially when you’re just starting out. Since every business will pivot and the unexpected will always happen, you probably won’t be able to plan for everything. That said, you should try your best to take note of every possible expense. When doing your financial planning and accounting, make sure you don’t leave out these five expenses.


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Finance and Sales Expert
Renzo Costarella gives financial tips and tricks to help retire early. He is an expert at fintech sales and was former sales person at Due. He currently is an account executive at Brex. Previously, he has worked in sales, product, and growth. He graduated from UC Santa Barbara with a Degree in Business/Managerial Economics.

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