The Hidden Costs of Running a Business


When you start a new business, you know you will encounter certain expenses. Running a business is certainly not inexpensive and it costs a lot more than many would assume.

Apart from the expenses that you are aware of, there are various hidden costs of starting a business. If you overlook these costs, it can cost you a fortune in the future, so it is a good idea to be prepared from the beginning.

Don’t let such hidden expenses ruin your business. Instead, try to control and reduce them with the tips mentioned below:


Expensive Loans

There are hardly a few cases where an entrepreneur has started a full-fledged business of their own through self-funding. No matter how much money you have, funding a start-up can be a real headache! You need to borrow money from external sources in order to fund your new business and make it functional.

This funding generally comes in the form of a small business loan from a financial institution or a bank. These institutions generally grant loans to enterprises having a good reputation in the market.

However, you can also apply for a loan if you lack business experience. If you don’t run an official business and don’t file your income and tax reports on a regular basis, your loan would be granted on your personal credit status.

If your personal credit score is not up to the mark, there are few chances of your loan getting fulfilled. Your loan may get rejected because of your bad credit score. You must be aware of this hidden cost that deals with your personal expenditures.

Also, if you are taking a loan for your business, make sure that you have a clean personal loan history. If you have any issue regarding your personal account, it would automatically affect your credit score.

For example, if you have been mis-sold a PPI policy along with the loan and you’re fighting for the claim, the entire tussle would affect your personal credit score. If so is the case, claim the refund as soon as possible.



Insurance is a really boring term to hear. You may not want to purchase it when you’re younger as you feel you are sure about your life and your belongings.

However, as you age, you start understanding the importance of buying insurance policies. These include insurances such as liability insurance, errors and omissions insurance, workers compensation insurance, cyber insurance etc.

How much you are willing to invest on a given policy is generally based on various components like business type, business size, industry, locality, profits, number of employees etc.

One can easily spend £1, 000 or more on every insurance policy each year. Paying insurance premiums account as some of the greatest hidden costs incurred by a business organisation. Therefore, if your business is running short of money, never invest more on insurance policies.


Professional fees

Whether you are a start-up business or an established one, finding the right expert for your business is a necessity. Hiring an accounts expert who can take care of all your finances is a better option than handling the funds on your own.

In the business industry, finding an attorney can be a real struggle as they serve only specific needs. Even after they agree to help you legally, you never know how much they would charge your firm for a case. These fees also add up to the hidden expenses incurred by your business.


Technology costs

Every business entrepreneur knows that by making the right use of technology, they can manage their entire business well. There are several devices that would help you get in sync with the technology prevalent these days. Depending on the nature of your business, you may require:

  •      Laptops for your employees to easily communicate with customers.
  •      Cell phones to track travelling employees.
  •   Custom data entry software that enables rapid order processing.

It doesn’t matter what field of business you are in, you always stand a chance to pay a decent amount of upfront innovation costs that ultimately fall under hidden costs.


Permits and licenses

No matter what sort of business you are running, there are high chances that you’d require some kind of a business permit. These permits or licenses you need will vary depending upon a few variables.

The location of your business empire has an impact on your licensing responsibilities. States and areas have diverse standards for business permits. Confirm with your state’s department of revenue to see your particular prerequisites.

The kind of business you run will likewise figure out the sort of permits you require. Industries have diverse necessities for permits and licenses. For example, if you open an eatery that serves liquor, you will require a liquor permit. If you start an ammunition factory or even a store, you would require a legal license. All these expenses made in order to get the license and permit are also counted as hidden costs.


Employee’s costs

If you hire employees, you will also have to take into consideration the cost of providing them with benefits and perks.

It doesn’t matter whether you have 10 or 100 people in your workplace, there are numerous employee expenses that you need to consider when running a business. Here are the areas where there are high chances of you spending money for your employees:

  •      Sick and maternity leaves
  •      Certifications and training
  •      Office perks like weekend parties

There are also certain employee turnover costs that include the cost of hiring and training them. All these costs add up to the hidden cost that is often not taken into consideration by many entrepreneurs.



Organisations who sell physical items confront this issue the most. Shrinkage is typically a reduction in the stock available with a business organisation due to natural or artificial means. Shrinkage can be caused because of numerous components like shoplifting, robbery by workers, a mistake in paperwork and scam by a seller.

Approximately 6 per cent loss in businesses is assessed because of such factors. Though you cannot completely avoid shrinkage in your stocks, you can still be prepared for it right from the beginning.



Paying taxes comes as a nightmare for majority of businessmen, especially the ones handling smaller ventures. However, taxes can’t be ignored as they are an integral part of the revenue that you earn. You need to consult a tax expert or accountant in order to discover your tax liabilities.

The amount you pay as tax will depend on numerous factors. If your company is enlisted as a limited liability company (LLC), you’ll have to pay an LLC charge every year. Moreover, you have to pay taxes on your organisations profits and on your company’s inventory in case you are producing new products.

Other taxes that may compose your hidden costs might incorporate:

  •   Payroll tax
  •   Property tax
  •   Sales tax
  •   Office supplies

Office supplies are not just about folders, pens and files. They can comprise of anything from tables to chairs, kitchen appliances, lighting etc.

In simple words, anything that helps your staff in performing their jobs and make their work easier can be included under office supplies.

The cost of these supplies is rarely written down in the books of accounts. Some of these costs incur during the initial stages of your business, which makes it even more difficult for you to keep a note of the same.  


Credit card fees

Do you anticipate giving clients a chance to pay with their credit cards? This choice gives your clients an alternative to make a bigger purchase, implying more earnings for you.

To acknowledge credit cards, you have to set up a seller account through your bank. After finishing all the procedures of application, you are generally endorsed to accept significant credit cards.

Then, you either need to rent or purchase credit card handling equipment from the bank. In case you are running your start-up online, you can likewise utilise an online payment processor. These fees also ultimately add on to the hidden costs to be borne by your business organisation.

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