New Startup? Watch Out for These Expenses!


You have a great idea and the courage to launch a startup… also, you hopefully have the money to do so. However, there are some massive expenses that can cause unprepared businesses to go belly-up.

The Statistics

According to stats from the U.S. Small Business Administration, there are 28.8 million small companies (businesses with ˂500 workers) in the U.S. alone. These provide jobs for 56.8 million employees and account for 99.7 percent of all U.S. businesses. Less optimistic stats show that around 1/3 of new businesses go bankrupt in the first 2 years and around 50% fail after 5. The U.S. Bank has estimated that 82% of new startups fail due to problems with cash flow.


Top Four Most Feared Expenses

  1. Legal fees

To help with legal impediments on the way to success, entrepreneurs need a lawyer. For one, startups need help to protect their intellectual property. Unfortunately, legal fees aren’t cheap and can tally up quickly. Lessen the blow by finding documents and templates online — there’s everything from operating agreements, to terms of service, form contracts, and more. A lawyer can just do the final tweaks.

  1. Taxes

Startup entrepreneurs typically know they’re going to have to pay taxes. They may be shocked at how much they are — even if they’re not making a massive profit. Minimize the expenses by working with an accountant all year through to ensure you’re getting the deductions you deserve to reduce your tax bill.

  1. Funding & Interest

To finance their dreams, many entrepreneurs have to take out a business loan. Stats from the National Small Business Association estimate that in 2016, 69% of small businesses used either loans or other sorts of financing. While loans might seem an easy and fast way to give a business a cash boost, don’t forget payment interests and interest rates. Read the fine print and consider using crowdfunding instead. Sites like Indiegogo and Kickstarter let startups crowdsource financing at more attractive terms than customary loans.

  1. Shrinkage

Startups selling their products online, or in brick-and-mortar establishments, may face unexpected shrinkage (due to employee theft, errors, and especially shoplifting, etc.). Stats from a 2016 National Retail Security Survey showed that shrinkage costs U.S. businesses around $45 billion annually. If your products are susceptible, install a security system or hire a guard. Also, if your business is in e-commerce, make sure you have a good auditing system to avoid errors and product loss.

Time Management Fears

Many startup founders worry about the time they will have to invest in their business vs time spent with loved ones. Launching a startup means long hours and little free time.  Fear not. You can balance work and your personal life with sound time management. Eradicate disruptions in the office, assign low-value jobs to others, and use scheduling and time management apps to stay on track.

Follow the above tips and you’re more likely to be among the startups that celebrate their 10-year anniversary!

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