New Business Tip: Start-up costs to consider as a new business owner

Milwaukee, Wis. – You’re too excited to think about expenses. And why wouldn’t you be? You’ve just chosen to go into business for yourself – realizing a likely years-long dream. Your opportunity to build a better product or bring a unique service to the public has finally arrived.

Worrying about costs now would only kill momentum.

Your journey from stoked to stressed may be short if you aren’t already considering potential start-up expenses. Building a business comes with plenty of costs you may or may not expect. Shopify found that “small business owners spend an average of $40,000 in their first full year of business.”

According to Nerdwallet (a BBB Accredited Business), common start-up expenses new business owners encounter include:

• Equipment ($10,000 – $125,000): At the very least, new businesses need an internet connection and a computer to operate. Other expenses can vary depending on the industry.
• Incorporation fees (less than $300): Filing articles of incorporation or articles of organization with your state is one of the first things new business owners must do.
• Inventory (up to 25% of total budget): Landing on this number starts by determining how much product will be sold over 12 months.
• Office space ($100 – $1,000 per employee each month): This number can fluctuate depending on the type of space needed for your business to operate effectively.
• Utilities (approx. $2 per square foot): Renting or owning office space comes with water, electric, gas, and phone bills.

But again, those are more common, mostly expected costs. Knowing where you might need to allocate your money as you start to set up shop is especially critical for out-of-the-ordinary expenses. We’ve compiled these lesser-known costs to consider as you get your business.

Professional consultants Many small business owners plan to do everything themselves, but professional assistance can take some weight off an owner’s shoulders. More importantly, financial and legal advice can save time and money and even protect from a worst-case scenario. It makes up for your shortcomings as a new business owner so that your track record in the marketplace stays positive.

• Accounting experts: While you may be an expert in your new business, that field may not be accounting. Hiring an expert to reconcile business expenses, pay bills on time, and ensure that taxes are collected and paid properly can keep you out of financial hot water.
• Employment Lawyers: Professional advice isn’t limited to the financial realm. If you’re planning to hire employees, consider retaining the services of an employment lawyer or HR consultant. These folks can help keep you abreast of proper wage and employment laws in your state, update you on federal hiring regulations, and make recommendations when an employee becomes a problem.
• HR Consultants: An HR consulting firm can work fine for these needs. Many of the best HR firms have their employment lawyers on staff. Expect to pay regular fees to a bookkeeper and a retainer or hourly costs for HR consulting or an employment lawyer.

Web presence

Going online is not an option for a new business – it’s necessary. You need a buttoned-up website that transparently promotes your business’s products, services, operating hours, and contact information.

So, expect to spend money on a quality website host, web design, site maintenance, and online security. If you’re taking payments from your website, ensure you have premium security to avoid compromising your customers’ data. A strong and trustworthy online presence makes a big first impression, especially when you’re new and building your brand.

Customers visiting your website for the first time may not go there to buy – even if you’re an exclusively online business. Savvy shoppers use their computers or smartphones to compare products and services online before purchasing.

This makes your web hosting, web design, and user experience important, especially as small businesses need the brand recognition and larger marketing budgets that regional companies enjoy. Expect to spend more than you anticipated for a premium online user experience.

Hiring costs

You must hire staff unless you plan to run your business solo or partner with one or two others. Expect to spend money advertising for open positions and background and employment history checks for your top candidates.

An HR consulting firm can take a lot of the busy work of a small business owner’s plate and conduct reference checks and the like in compliance with fair hiring practices. Businesses that choose to have pre-employment drug screening (some business licenses require this) should expect higher costs at the outset since you’ll be testing multiple employees at once.

Hiring an HR consultant to get you staffed isn’t just about expertise in recruiting, interviewing, researching candidates, and filling out employment paperwork properly – although these are all important. These things take a lot of time, and for a new company, time is money. Consider if it’s worth hiring a consultant for around $1,000 to take care of initial staffing instead of taking time each day to address the hiring process.

Insurance

Each business has different requirements for insurance coverage. Due to the nature of the business, construction companies, medical practices, and restaurants tend to have higher coverage requirements. Workers’ comp, malpractice, and liability insurance (if a lawsuit-happy customer slips on your floor) are all important. Purchasing the initial premium may be much more than the monthly costs you’ve worked into your business plan.

In addition to the insurance coverage required for your business license, consider supplemental insurance. Contractors, for instance, can benefit from additional coverage, as potential injuries could cost more than the standard premium. Your business may be small enough that you won’t be required to offer health insurance for employees, but if you plan to grow, keep this upfront cost in mind for budgeting in future years.

If you have questions about which coverage options are most appropriate for your company, these resources may offer some clarity.

Final thoughts

Pair your excitement over starting a new business with an expectation that start-up costs are coming, and only sometimes in areas you may expect. Inventory, leasing fees, rent, and general overhead expenses – are all typical for a small business opening. To ensure your success, don’t neglect these lesser-known start-up expenses.

Looking for more ways to grow your new small business? Check out the BBB business news feed and the BizHQ.

Visit BBB’s new business hub to learn more about starting your own business!

For more information or further inquiries, contact the Wisconsin BBB at www.bbb.org/wisconsin, 414-847-6000 or 1-800-273-1002. Consumers also can find more information about how to protect themselves from scams by following the Wisconsin BBB on Facebook, Twitter, Instagram and YouTube.

ABOUT BBB: For more than 100 years, the Better Business Bureau has been helping people find businesses, brands and charities they can trust. In 2021, people turned to BBB more than 200 million times for BBB Business Profiles on 6.3 million businesses and Charity Reports on 25,000 charities, all available for free at BBB.org. There are local, independent BBBs across the United States, Canada and Mexico, including BBB Serving Wisconsin which was founded in 1939 and serves the state of Wisconsin.

NOTE: This press release was submitted to Urban Milwaukee and was not written by an Urban Milwaukee writer. While it is believed to be reliable, Urban Milwaukee does not guarantee its accuracy or completeness.