The List of Essential and Unnecessary Startup Expenses

by QuickBooks

4 min read

One of the biggest concerns you probably have when you begin tackling the launch of your startup is cost. There are diverging theories and parables about business that promote conflicting ideology about what it takes monetarily to get started. There’s the old adage that “you have to spend money to make money,” but there’s also the business philosophy of the lean startup. So which is it? How much do you need to get your business idea out of your head and into action?

When you decide you’re ready to start your business, here is a handy go-to guide of the top essential expenses you will need and can expect for your startup, as well as a list of overrated expenses that are simply unnecessary.

Essential List:

1. Infrastructure and Systems

Systems are the foundation of your startup. When you nail the proper foundation and systemize your business, you’ll be able to expand and grow easier and faster. Start with thinking about how you will capture your leads, clients and customers so you and your entire staff can locate these lists from a centralized platform.

This is called customer relationship management (CRM) and there are some great systems out there. They vary in price, but can be as inexpensive as a few hundred a month, up to several thousand a month. Pick the price point and features that are right for you to get started with managing your client base from day one.

2. Equipment and Internet

Internet interruptions, computer load time and other seemingly harmless side effects of bad platforms and equipment don’t seem like a big price to pay, but you’re actually losing valuable time with each interruption. Getting you and your team on quality equipment with an excellent broadband connection (i.e. at least the 3Mbps per second of upload capability) will save you money and time in the long run.

According to Everstream, a Cleveland-based network provider, companies that adopted broadband-enabled technologies had a 27 to 31% increase in revenue. Time is money, so don’t waste it waiting for pages to load.

3. Outsourcing

Hiring employees is expensive during the startup phase. As much as possible, you should be outsourcing work. By outsourcing to freelancers, you can save money on employee overhead. It also helps you limit your outsourcing needs exclusively to what you need help with, and only when you need it.

Startups can outsource work such as writing needs, graphic design and even some computer programming. Check sites like Elance and Fiverr for great rated freelancers who will work project by project for you.

4. Accounting and Bookkeeping

Hiring an accountant and a bookkeeper are two essential roles for the success of your business. You simply do not have time to worry about bills and invoicing when you’re getting your business started. Use helpful tools like free invoice templates to complete the basics quickly and easily. Choose an easy accounting platform like QuickBooks Online to keep your business running properly, and all accountants and bookkeepers will be able to work inside this standard software.

Check out the American Institute of Certified Public Accountants website and the American Institute of Professional Bookkeepers to find qualified applicants in your area. This isn’t a big cost line item, but it’s an essential one to keep your business running smoothly and to properly plan for taxes, expenses and your eventual expansion.

Overrated List:

1. Staff

As mentioned above, when you’re first starting out, the expense of employees can sink your business. Employees require various federal taxes, employment programs and more, which most startups simply can’t shoulder in the beginning.

Look to outsourcing to help you get the resources you need on a freelance basis, or hire team members who can manage outsourced workers.

2. Office Space

Unless you truly need office space (e.g. if you run a bakery, retail shop, etc.), you should always consider keeping the office space at home, or finding a space that is as inexpensive as possible. Office space cuts dramatically into your bottom line in more ways than just the lease cost. There are common area maintenance (CAM) fees, parking fees, insurance costs, utility costs and the list goes on.

If and when you do need some office space, consider a co-working space in your area that will help you network with other entrepreneurs. You will be able to have office space on a much more affordable startup budget.

3. Patents and Trademarks

Unless your company truly has some piece of revolutionary technology, consider waiting before filing for patents and trademarks. Applications are expensive and lengthy, and you will more than likely need the help of an attorney.

It’s far better to test out your startup for the first year and if you’re gaining traction in the market, then start to apply for a trademark or patent as needed. Obviously, if you’re selling a unique product, then this advice doesn’t apply. Otherwise, this is an expense that can wait until your startup is more established.

There are lots of dos and don’ts for expenses when you’re starting out. This is just a highlighted list of some of the biggest ones that you will want to consider. The Small Business Association also keeps a list of resources that you may find useful. While there is no single answer as to how much you should expect to spend, mapping out a plan in advance will provide you with a good path to success.

Need more advice for starting your business? Then check out our big list of everything you need to do when following your entrepreneurial goals.

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