If you’re like most new business owners, you probably took the risk of starting your own business because it’s a lifelong dream or passion. The thing is, most business owners often forget that it takes money to make money – especially when you’re just starting out. There are many overlooked costs.

Sometimes these expenses are obvious, like your salary or equipment to produce your products, but there are a lot of costs involved with starting and running a business, like these 25 overlooked costs.

1. Research Expenses

Prior to starting a business you need to conduct careful research of the industry and consumer makeup so that you can validate your business idea, make sure there’s a market, and know who your potential customers are going to be.

While some business owners choose to hire market research firms, you can conduct your own market research through phone and email surveys or focus. Just prepared to dish out anywhere between $5,000 and $15,000.

2. Incorporation Costs

One of the first, and most important, decisions you’ll make as a business founder is if you’re going to form either an LLC (a limited liability company) or a C corp (a traditional corporation).

When it comes to the structure of ownership, LLCs are extremely flexible. However, if you plan on growing your company, which will involve an angel investment or institutional capital, then you may want to form a C corp. Unlike an LLC, a C corp gives you the ability to issue stock, which we’ll discuss in moment when going over borrowing costs.

Regardless of the entity you choose, incorporating your business requires lawyers, which cost a lot of money. In fact, according to Entrepreneur, hiring a lawyer to help you incorporate your business can cost you between $500–$1,000. And that’s not even including the addition of your jurisdiction’s filing costs and periodic mandatory filings. If you’ve looking for a less expensive legal option you can check out a service like LegalZoom.

3. Business Insurance

Insurance is strongly recommended for your space, inventory and equipment, and your employees. Typically, the types of insurance your business will need to consider are:

  • General Liability Insurance
  • Medical Insurance
  • Worker’s Compensation Insurance
  • Commercial Vehicle Insurance
  • Professional Liability Insurance

General Liability Insurance will protect you from disasters, theft, slip & fall, etc. If you have full-time employees then you’ll have to carry Worker’s Compensation Insurance, while Liability Insurance or Errors and Omissions Insurance will shield yourself against potential lawsuits

Insurance can get pricey, but it’s necessary.

Talk to your lawyer about what kind of insurance your business needs and then comparison shop for the best insurance quote through sites like CommercialInsurance.netInsureonThe Hartford, or Comparethemarket.

4. Permits, Licenses, and Dues

The permits and licenses you may need to do business in your community aren’t just one-time expenses. They often have to be renewed, so make sure that you factor in those continual expenses and then set that money aside. You’ll also want to set aside the money for membership dues that you have with networking organizations like your local chamber of commerce or industry/professional groups.

If you want to reduce these costs, be selective about the groups you join since annual memberships can cost you hundreds of dollars. Furthermore, focus on memberships that provide business-related discounts on items like insurance, loans, credit card fees, supplies, and training.

5. Product Development Costs/Online Costs

If you’re building a product then you’re going to have invest in putting together an experienced product and design team in order to build, iterate, and continuously improve your product. In most cases this will involve the cost of designing, engineering, and manufacturing your product – which can get very expensive. However, you can’t skimp on these costs if you want to develop the best product available.

What if your business is involved in the service or ecommerce industry? Then you’re going to have to spend money on areas like developing your skills, creating compelling content, networking, building a portfolio, setting up an ecommerce site, and handling cybersecurity.

6. Borrowing Costs

Even if you decide to bootstrap, starting a business still requires some sort of capital. Generally, there are two ways to acquire capital for a business: equity financing and debt financing.

With equity financing you raise capital in exchange for stocks of the company. It may be initially a good idea to attract investors, but you may have relinquish some control of the business to them or ultimately buy them out or give them a nice chunk of change when selling the business.

Debt financing, on the other hand, comes from a small business loan through banks, savings institutions, and the U.S.Small Business Administration (SBA). Like any other loan, business loans come with interest payments. Since the cost of default can be very high, you need to them into account when getting your business off the ground.

7. Taxes

Your annual taxes will depend on the type of structure that you selected. An LLC affords its partners a more flexible tax structure since owners can choose whether or not to be taxed as a partnership or a corporation. Keep in mind that if taxed as a partnership, profits and losses will go through to the owners of the LLC. However, each partner will pay self-employment taxes on their share of the partnership profit.

A C corp, on the other hand, is usually double-taxed since it issues stock and, therefore, dividends. A C corp will pay taxes on its corporate profits (usually in the range of 20% and 40%) and then pays taxes again on any dividends it issues. C corp founders should also plan to pay a first-year franchise tax prepayment which is a fee usually between $800 to $1000.

8. Employee Expenses

If you plan on hiring employees then you need to plan in advance expenses like wages, salaries, and benefits (if offered), as well as advertising, interviewing, and training. Failure to compensate employees adequately will eventually result in low morale, mutiny, high turnover rates, and bad publicity.

Additionally, hiring the wrong employee can cost you as much as 30% of that employee’s first year earnings, which can add up to thousands in lost revenue. You can reduce these hiring costs, and find the right employee, by writing clear job descriptions, asking the right interview questions, testing employees, using a temp agency, and offering competitive wages.

9. Technological Expenses

Technological expenses can include the cost of purchasing a domain and host, building your website, information systems, computers, internet fees, and software, such as your accounting and payroll systems. You may decide to outsource these functions to other companies or freelancer to save money, but if you decide to do this on your own there’s affordable software options like Due and Wave.

10. Founder Agreements

If you’re going into a business partnership, especially with a roommate, friend or spouse, then don’t be surprised if the casual arrangement you made will backfire. After all, it’s not uncommon for personal issues to influence business decisions and vice versa

To protect the interests of both parties, and salvage your relationship, hire a lawyer to draft a founder agreement and set expectations that will deines your roles and responsibilities, your equity ownership and vesting schedules, your intellectual property assignment, and the worse-case scenarios . Even though this may cost you a couple of hundreds of dollars, it’s definitely worth the investment if it prevent any potential drama.

11. Trademarking

Filing trademark registration will protect your brand and prevent others from stealing or copying your name or invention. The US Patent and Trademark Office (USPTO) has a detailed primer on the benefits of federal trademark registration – which is definitely worth reading before you get your business started.

Since the USPTO has several different types of trademarks, the application fees can vary – on top of the additional cost of hiring a trademark lawyer. However, it costs around $400 to apply to trademark a business in one category and an additional $300-plus for each additional category.

12. Shrinkage

Shrinkage is simply a loss of inventory at some point between its purchase from your supplier and its purchase by your customer. According to Fortune, retail shrinkage costs U.S. retailers approximately 1.4 percent of their total sales –which comes out to around $32 billion per year!

While business owners never plan to lose inventory, there are plenty of unexpected causes like short shipments from a vendor, picking errors that lead to customers receiving more than they ordered, damaged goods, or theft that can lead to shrinkage. The easiest way to prevent shrinkage is by investing in an inventory management system that uses barcodes and scanners. This will reduce the risk of shrinkage since you’ll have real-time data on everything from raw materials needed for production to small consumer products.

13. Credit Card Processing Fees

If you process credit cards then expect to deal with interchange fees. This is typically a per-transaction flat fee and a small percentage of each transaction – which is usually around 3 percent of total charges. It may not seem like a lot, but those fees can weaken your cash flow if you’re not taking them into account.

These fees are unavoidable, but there are ways to lower these fees, such as accepting other forms of payments like ACH, bitcoin, or using companies like Due that charge a low 2.8% rate for all card types.

14. Payment Delays

Payment delays can include everything from customers forgetting to make a payment, your bank holding a transaction for several days, and payments posting later than you expected due to a holiday. The problem is that your payments never miss a due.

In other words, payment delays can seriously hurt your financial bottom line – especially when payments are expected by a certain date in order to cover your expenses. For example, you may bounce a check or miss a utility payment because of a payment delay. This can lead to overdraft or late fees and may even lower your credit rating.

Sometimes the unexpected happens, but to avoid payment delays you need to get paid faster by shortening payment terms with customers, asking for money upfront, offering the option of recurring billing, and having some money stashed in an emergency fund so that you can at least cover essential expenses like payroll, insurance, rent, and utilities.

15. Office or Retail Space

Working from home isn’t a problem for freelancers or start-ups in their early stages. However, depending on your specific business, there may be zoning and other regulations that might require you to have something more official.

Before purchasing or renting a workspace, think about how much space you need currently and what you’ll need as your business grows. You should also think about the location of the business. For example, if you’re in retail, then you’ll need something that is easy for customers to locate and park. You may even want to consider temporary office space through Regus, Liquid Space or Share Desk.

Besides the actual workspace, don’t forget about your utilities like electricity, phone, and internet. To reduce these costs, look for utility providers that provide options like flex-pay, competitive rates or budget billing, and energy audit programs.

16. Equipment, Maintenance, and Upgrades

The tools you’ll need for your small business in order to create a product or run a service are often obvious. For instance, if you’re a freelance writer then you’ll need a computer and reliable internet connection. But it’s not uncommon for smaller equipment costs to get lost in the mix. Again, a freelance writer may have to also invest in editing, project management, and accounting software, as well as the cost of designing and furnishing a proper home office.

Using second-hand and discount sites such as eBay, Overstock, and ROE and is a great way to save some cash when starting your business out. You may also want to think about purchasing a protection plan. You should also keep a reserve of funds for the inevitable equipment malfunction so that you can keep operating.

17. Office Supplies

Do boxes of pens and printer paper really add up to much? Maybe not initially, but over time those minor costs can add quickly. And, that’s not considering the cost of organizing those supplies. In fact, you may spend $1,500 a year on filing cabinet costs alone!

To eliminate these costs, you need to go paperless. Not only will these reduce the costs on office supplies, it can also increase your productivity. And, it’s better for the environment as well.

18. Office Overhead

As your business grows you’re probably going to outgrow your home office or coworking space. This means that you’ll need to think about renting an actual office space. Depending on factors like your location and the amount of space you’ll need, this can easily set you back hundreds of dollars (or more) each month.

If you needed an office from the get-go, then overhead might mean moving to a larger location to accommodate your growing workforce, expanding your parking lot, utilities, rent, salaries, insurance, and office supplies and equipment.

19. Graphic Design

If you want to build your brand then you’re going to need an original, beautiful, and eye-catching logo for your company. After all, branding is paramount in today’s world. So, shelving out the cost for a graphic designer is definitely be worth the investment since it will make you stand out and create a solid first impression with customers, investors, and potential employees.

If you’re on a tight budget, consider crowd-sourcing your logo from sites like 99Designs, CrowdSpring, or Design Crowd.

20. IT Support and Web Development

Since you’re just starting out, I highly doubt that you have the $60K-plus budget to hire a full-time, in-house web developer. The good news? You can also always hire freelance developers on an hourly wage through sites like Toptal. Remember, branding is paramount and having a functional website is a big part of branding yourself – it proves that you’re a professional and authority figure.

If you can’t find a freelance developer, you can also look overseas for development teams. For example, the Ukraine is known for having an outstanding IT sector.

21. Advertising and Marketing

Your new company isn’t going to promote itself. That’s why you need to plan for advertising and marketing in your budget. However, this is more than just advertising and promoting the ad placement. This also includes marketing – which is everything that a company does in order to attract clients to the business like writing blog posts, filming YouTube videos, hosting an event, attending a trade show, or cold calling potential customers.

You can hire an external company to handle content creation, manage your social channels, or develop an ad since they understand the science of marketing. However, you can also market your business your own if on a shoestring budget.

22. Memberships and Subscriptions

Joining your local Chamber of Commerce or BNI group is a tried and true way to grow your business. The things is, those membership fees aren’t cheap. Even worse? Most new business owners only focus on participating in groups with professionals who are exactly like them.

While trading stories from the trenches can be helpful by steering you in the right direction, you should also be present where your high funnel audience is. This prevents you from only networking in a vacuum – which definitely won’t help grow your business.

23. Professional Services

Make no mistake about. Legal and accounting fees will quickly add-up to thousands of dollars annually. However, these specialists can ultimately save you money and time. As mentioned several times, legal professionals can help untangle red tape that’s holding your business back from growing.

Accounting specialists can assist you translating tax codes, maintaining accurate payment and inventory records, locating grants to help fund your endeavors, and determining what you can deduct on your taxes.

To save some money, don’t be afraid to negotiate with these professionals so that you can keep fees manageable. And, while you’ll need a CPA or lawyer to do more complex tasks, smaller tasks can either be handled by their less-expensive support staff or outsourced to freelancers.

24. Overlooked Costs: Time

Your time is arguably your most valuable resource. As such, you can’t afford to waste it.

When starting a business, think about how much time and energy you’re spending on business tasks that could be farmed out, delegated to another employee, or automated. Also consider if you’re neglecting yourself, friends or family. For example, or you balancing books instead of having dinner with your family or networking with potential clients? If so, then it’s time that you focus on building and maintaining the personal relationships. These can help you grow both personally and professionally instead of busy work.

25. Emergencies

It’s Murphy’s Law: if anything can go wrong, it will.

Will budgeting for unforeseen circumstances can be challenging, it’s a necessity. Why? Because it will provide you with the capital needed to get out of most emergencies.

How much do you need? It can really vary. Most experts agree that you should have at least 3-6 months worth of expenses in an emergency fund.

The Bottom Line

Launching your new business is so invigorating and exciting that it’s easy to neglect the details. These can easily lead to your business failing. But, you simply can’t afford to overlook those details, like the costs listed above. Furthermore, you should also consult with others who have traveled this road before. They can share with you the mistakes and successes that they made along the way. It’ll make for a much happier life!