Starting your own venture can be an exciting endeavor. Being your own boss gives you a sense of empowerment and freedom. However, to make sure you’re heading in the right direction, you need to have a plan in place.

It’s common for entrepreneurs—especially first-timers—to concentrate on avenues for revenue generation and neglect to account for expenses that they’ll incur during the course of their business.

Even the most carefully planned budgets may lack some important expenses that can put an additional strain on the business’s cash flow, if not identified at an early stage.

Let’s discuss some important expenses that entrepreneurs forget to budget for.

Insurance costs

Entrepreneurs often forget to account for insurance costs when preparing a budget for their business. There are several types of insurance available; while your startup won’t require all of them, it’s necessary to be aware of what your requirements are.

The cost of insurance is variable and highly dependent upon your business, industry, and other risk factors. A typical startup may require general liability and product liability insurance. In some cases, you may also need commercial property or worker’s compensation insurance.

Again, it’s important that you learn about your needs so that you can factor in the costs associated with insurance in your budget.

Incorporation costs

A surprising addition to this list is the costs associated with starting a business. Depending on your future expansion plans, you may choose between an LLC and a C Corp.

Regardless, you’ll be required to register your business, which costs money. This may include registration of your business’s name and obtaining licenses and permits from relevant authorities. Also, you’ll also need to pay your lawyer fees as well.

When accumulated, these costs can eat up a substantial chunk of your budget. They should be factored in as pre-trade expenses in your budget, so that you’re not understating your first year financial requirements.

Borrowing Costs

There are two primary ways of acquiring capital for a business: equity financing and debt financing. The former gives you breathing space in terms of finances, but you have to share your profits and relinquish control to the financier.

Contrarily, opting for debt financing via a bank, Small Business Administration (SBA), or any other lending institution will give rise to interest payments. In case of non-payment, you may be subjected to hefty penalties and fines.

Therefore, you should never forget to include interest payments in your budget.

Technological Expenses

Businesses today require a lot of equipment and tools to function. These may include computers, internet fees, and other IT costs such as payroll and accounting software, etc.

Moreover, if you want to maintain an online presence, you’ll need to purchase a hosting, domain, and hire a professional to develop a website for your business.

These costs—when combined together—can amount to a decent sum, and mustn’t be ignored.

Emergency repair costs

During the course of business, there are hundreds of things that can go wrong; equipment can malfunction, devices can stop working, and even electrical repairs can disrupt your operations. It’s important that your budget has a provision to deal with these expenses.

Emergency repair expenses are something that you can’t possibly predict in advance, but you can set aside some funds for unexpected expenses. This will ensure that you’re practically prepared for any emergency or unexpected costs.

Utility costs

Most entrepreneurs—especially those who start off with a small office space—add the cost of rent to their financial plan, but fail to budget for utility expenses, assuming that they’re not a material cost for their business.

However, that’s often not the case. Even a small startup may end up paying hundreds of dollars every month in electricity, gas, phone, janitorial service, repairs, and other expenses related to housekeeping and utility.

You may estimate these costs by consulting other businesses that operate in your vicinity. But remember, each business requirement varies so you’ll have to take your business’ needs into consideration as well.

Extra human resources

It’s not uncommon for entrepreneurs to underestimate the resources and manpower they’ll need to keep their operations up and running. In most cases, they hire as few employees as possible to keep their operating costs to minimal.

However, when they later realize that they need extra human resources, they face financial constraints as they haven’t made a provision for extra hires in their financial projections. Smart entrepreneurs often hire freelancers and part-timers to mitigate this issue.

Final Words

Planning a budget for your startup can be one of the most taxing aspects of entrepreneurship.

However, it’s critical that you have a reliable estimate of your startup costs—and your financial requirements—to make sure your company has enough cash to sustain their operations.

If you’re looking for an experienced accounting firm to help you draw a realistic, functional budget that incorporates all necessary expenses of your business, A&B Accounting and Business Solutions can help.

Located in Deerfield Beach, FL, we offer a wide range of financial services, including but not limited to, accounting services, bookkeeping services, and taxation services to our clients.

We don’t only provide reliable business accounting services in Florida, but also offer our services to nationwide businesses. Your startup can benefit from our accounting and business solutions.

For more information, feel free to call us at 954-596-9966 or visit our website.