Hidden Expenses Growth-Hungry Startups Need to Be Aware Of

One of the most prominent definitions of ‘startup’ term was coined by Paul Graham, a programmer, entrepreneur and an essayist. While most other theoreticians tried to connect ‘startup’ word with advanced technologies or newly founded companies, he said that startup enterprises are those that are designed to grow fast. This fast company growth is in most cases (but not exclusively) fueled by advanced tech and innovative business strategies. Achieving fast and continuous growth is not always easy. It is often fettered by various unpredicted circumstances and hidden costs.

Employees

Regularly employed workers require a lot of spending. Depending on the country or state law, companies need to pay for sick leaves, vacations, health insurance, and taxes. Companies that have less than 10 workers pay the most expensive health insurance. These costs are the reason why many startups decide to outsource parts of their business or to hire freelancers to do most of the tasks.

Another very important point when it comes to human resources and office management, is that startups need talented employees, who will get the job done. In some cases they can rely on outsourcing agencies or talented freelancers, but if they want to make their company attractive to the top experts in their niche, they need to add a lot of benefits (like high 401(k) share), clean and secure work environment and even employees stock ownership programs, that include handing out company shares to most effective and agile employees.

Rent

Most startups begin their lifecycle in founder’s home or in a work hub. When business starts growing startup owners need to rent new office space. This is a very difficult period, since entrepreneurs are still not sure about their business’s potential, but they need to work and cover increasing client orders. That’s why these companies are stranded in between small and big business models, which makes them an eligible pray for money-craving property owners. At this moment company’s business is too small for taking a mortgage loan or building their own premises and too big to work from home or a work hub. This means that the money company is giving for rent is not getting them any equity, which is why entrepreneurs should decide to shift to mortgage or building their own space, as soon as possible.

Utilities

Utilities’ costs can be quite high. In most cases they are as high as the cost of leasing office space. Many companies decide to pay several utilities’ costs in a bundle, which makes them less harmful to their budgets. Phone and internet costs usually come in bundle packages.

Another great cost that concerns utilities is when something gets broken. Companies that work in service and production industry are especially sensitive to these situations and installation failures can seriously damage their customer loyalty and revenue figures. That’s why these companies need to have employees who are familiar with commercial plumbing market and services, and react immediately and fix the problem.

Tech

All new businesses need to spend money on latest gadgets. Without advanced tech they would never stay competitive in the harsh business world of today. Most tech comes with 2 year warranty, but if used for business purposes computers, phones, printers, modems and scanners usually last much shorter.

Most businesses require smartphones, computers, printers and plenty latest software packs. In addition to this they might also need scanners, modems, fax machines and many different niche-specific gadgets and production equipment. On top of all these costs companies also need to pay for maintenance of their systems and hardware, which can be quite expensive.

All these costs can drastically hurt startup businesses, which is why entrepreneurs need to include them when determining company’s budget for the next fiscal year. Although entrepreneurs should be optimists about their business growth, pessimism definitely eliminates certain risks when it comes to company expenses and finances.

Derek is a writer from Australia. He likes exchanging business and success tips with bloggers and enriching his experience in order to deliver informative articles. One of his hobbies is interior design. To fulfill his passion, he blogs regularly at Smoothdecorator.