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Hidden Costs of Running a Small Business
Hidden Costs of Running a Small Business

Hidden Costs of Running a Small Business

A lot of people oversimplify the idea of running a small business believing that the success can be reduced to how much you manage to charge for your products.

Needless to say, this point of view is simply absurd, seeing as how it completely ignores all the follow-up costs that come with running an enterprise.

Of course, the cost of supplies and employee wages are something that everyone is well aware of but what about all those hidden costs? To make things even stranger, most of these ‘hidden’ costs, aren’t even that hidden, but people still somehow manage to lose them from sight.

With this in mind, here are a couple of these overhead expenses you should be reminded of.

License fees

The first thing you need to keep in mind when planning to start a business are the license fees. First of all, you need to register your company, which, on its own, isn’t that inexpensive. Next, you need to check what kind of licenses you need in order to be up and running. Getting a permit to trade in your region is the bare minimum, due to the fact that certain items may require some permits on their own.

For instance, if you were to start running a bar you might want to focus on getting a liquor license. Still, this is just one industry-specific example you might encounter. You also need to think about registering to your local chamber of commerce.

Office utilities

When it comes to business expenses, everyone remembers to consider the lease on the space. What a lot of people forget, however, are the office utilities. The larger the place, the more power you will need for heating (or cooling down in the summer), illumination and the office equipment.

Additionally, the more people you employ, the greater your water consumption and waste-management expenses. This makes things even more complex, seeing as how even the people who initially add these expenses to their budget, often forget to do an update.

In other words, they double their workforce but forget to consider the way in which this affects their office utilities. Over the course of the year, this can significantly throw off their budget estimates, which can, in time, become a major problem.


People without any previous experience with running a business often know little about taxes. Handling the taxes of your own household definitely helps but it doesn’t prepare you for doing the same for a company.

In fact, sole entrepreneurship and partnerships pay taxes according to a different scheme, which sometimes means that even the previous similar experience doesn’t have to apply in this new scenario.

This is why it would probably be for the best to hire a professional bookkeeper or tax consultant. Furthermore, seeing as how regional laws commonly differ, you might want to take a local.

So, if you are running an NSW-based enterprise, your safest bet would be to look for a renowned tax consultant from Sydney instead of settling for someone half a globe away.

For instance, Australian small businesses can claim income tax reduction for their home maintenance, in a case where their home is listed as the seat of their small business. However, they cannot claim a deduction for private or domestic expenses.

Legal fees

In 2017, even the smallest of companies need to have their legal representatives, seeing as how you never know when you will need their services. Bogus lawsuits and unjustified accusations of false marketing are just some of the issues you will probably have to deal with at one point.

Sure, in most cases, these lawsuits are so ridiculous that they can easily be dealt with, still, they should never be outright dismissed. Even some of the world’s greatest conglomerates were known to fall prey to ridiculous lawsuits, so you shouldn’t underestimate them either.

Apart from this, you also want someone skilled to handle your insurance issues, not to mention surety bonds, which are one of the most important tools for trust-building early on.

You see, as a new company without any portfolio, you will have a hard time convincing people to entrust you with some of the more expensive projects. This is where surety bonds come in to provide at least some form of financial guarantee.


The next major issue on this list are the costs of marketing. Those who decide to simply outsource, have a much easier job estimating the total costs of their marketing. All they have to do is wait for a bill from a company they are outsourcing to. It’s even easier if the costs are predetermined.

However, if you are to conduct your own marketing, this is where things might get a bit blurry. All of the sudden, you have to calculate the price of starting a website, printing promotional materials, not to mention the cost of online ads and similar services.

Moreover, you might decide to outsource a section of your marketing (social media marketing, content marketing or digital marketing altogether) and handle the rest on your own. This creates a dangerous trap for your marketing expenses appearing lower than they actually are.

Employee benefits

Finally, while salaries are something that everyone takes into consideration, same could not be said about employee benefits. Medical leave, health insurance, training, and bonuses are all things you need to include into your budget.

Now, this particular expense is a bit controversial, since it also saves you money. Providing optimal working conditions goes beyond humanity or even being a considerable boss – it adds to your efforts of employee retention. According to one survey, it costs about one-fifth of an employee’s salary to replace someone in your company. In some industries, however, this goes even higher.


At the end of the day, running a small business is quite risky as it is, even without forgetting to include a major expense into your overhead. According to some sources, it takes somewhere between six months and two years for your business to become self-sustainable.

This means that overestimating your profit might give you a false sense of self-confidence and create impossible long-term plans for your company. Luckily, with enough planning, research, and careful consideration, this disaster can easily be averted.

About Victoria Lawes

Victoria is a Digital Marketing Strategist. She works with driven, creative, and passionate entrepreneurs and small business owners that want to bring their visions to life. Enthusiastic writer who follows latest marketing and technology trends to get a glimpse of the future. Contributor at