🕐 Read Time 5 Minutes

Anyone who runs their own business knows how thrilling and empowering it can be. Selling a product or service, working when and where you want, and having unlimited earning potential are just a few of the perks. But with all of this freedom comes a good deal of responsibility. 

As a business owner, it’s up to you to manage everything — including your finances. And no matter how financially savvy you are, there are hidden costs of running a small business that surprises even the most well-intentioned entrepreneurs. 

Instead of letting potential overwhelm and hidden costs keep you from running a successful business, take a proactive approach to your business finances. That means building a business budget — with these seven hidden costs included — so you won’t be caught off guard.

1. Small Business Taxes 

It’s super exciting when your business starts earning an income. So make sure to celebrate! But before you spend all that money — whether you’re paying yourself or investing back into the business — make sure you’re setting money aside for taxes.

If you’re wondering why you need to send some of that hard-earned money to the IRS, let me give you some context: If you’ve ever worked for someone else, you probably noticed taxes withheld from each paycheck you earned. You didn’t have to worry about paying taxes throughout the year because your employer handled it for you. But now, as a business owner, it’s your responsibility to pay taxes on your earnings.

Wondering how much this will cost? It depends on where you live, your profitability, tax deductions and credits available, and how your business is structured, among many other factors. 

If this sounds overwhelming, I always recommend consulting a tax professional — more on this below!

2. Small Business Fees, Licenses, and Permits

There are certain costs when running a business that — when neglected — can lead to even more (and more expensive!) hidden costs. I’m talking about small business fees, licenses, and permits — everything needed to make sure your business is legit. 

While there is an upfront (and sometimes annual) cost to ensure all your legal ducks are in a row, it’s better to pay now than to face fees and penalties down the road for lacking the proper licensing. 

Necessary registrations, licenses, and permits for your business will depend on your industry, location, and business structure. You’ll need to do some research to figure out which of these you’ll need and at what levels — for instance, federal, state, or local. The cost of these necessities will vary, too. Make sure you do your due diligence so you know what to expect to pay in your unique situation and can build it into your budget. 

3. Employees, Contractors, and Consultants

When you first get your business up and running, it’s possible you’ll want to do everything yourself: Operations, marketing, sales, accounting, etc. Depending on your business, that may work for you for a while. But for many business owners, there comes a time when it makes sense to bring in some outside help.

Whether or not you decide to hire full-time employees will depend on a range of factors. Keep in mind that you don’t have to hire employees to get support for your business. You may decide to hire contractors or consultants to help with anything from copywriting to bookkeeping on an as-needed or retainer basis. 

Regardless of how you work with employees or contractors, you’ll be responsible for paying them. Keep these costs in mind as soon as you start thinking about building a team. 

4. Software Programs, Tools, and Apps

When it comes to keeping everything in order — like schedules, invoices, and client information — you’ll need systems. When you’re first getting started, free software and apps can take you a long way. But at some point, you’ll probably want to invest in more efficient and high-tech programs.

It doesn’t matter what kind of business you run — most business owners will need a handful of the same types of programs at one point or another. Common examples of software and apps you may need include:

• A payment processor

• A client management software

• A task management software

• Google Suite

• A payroll system

• Accounting software

• An email marketing platform

• A website builder

Depending on how you run your business, you may need only a couple of these products — or you may need all of these and more. Once you identify a need for a new tool, be sure to work the cost into your business budget. 

5. Financial and Tax Support

As a financial coach, I love to nerd out over budgets, revenue, and spending. But I know that’s not the case for everyone. If you don’t relate to my love of numbers, this might be an area of your business you want to outsource. 

No matter how small your business is, it’s important to stay on top of your taxes, earnings, and expenses. And as I mentioned earlier, you’ll want to keep track of these things in your business budget. But you don’t have to do all this heavy lifting alone. For example,

• If you’re struggling to form a plan to reach financial goals and understand your numbers in your business, a financial coach can help.

• If you’re overwhelmed trying to plan for and pay your business taxes, a tax professional can help.

• If you’re stuck creating and understanding financial statements, managing payroll, or sending invoices, a bookkeeper can help.

At one point or another, you’ll likely want support in at least one of these areas. So plan ahead now, and build it into the budget!

6. Professional Development and Education

Arguably, the most important thing you can invest in as a business owner is your own continued education and development — so don’t let this hidden cost creep up on you.

As a business owner, you’ll learn and grow quickly. At some point, you’ll identify areas where you want to grow or learn more — and faster. And when this happens, you’ll want to be financially prepared to invest in courses, memberships, coaching programs, masterminds, or professional development opportunities that can help. 

Because this cost isn’t a “necessary” expense, you may be tempted to leave it out of your budget. But if you want to continue to make your skills and your business valuable, make sure you plan ahead for these expenses.

7. Unexpected Expenses

Unfortunately, emergencies happen. And they happen in business, too. 

Just like in your personal life, it’s important to plan for unexpected expenses in your business — before they happen. The way to do this is to build an emergency fund, cash cushion, slush fund, miscellaneous category — whatever you want to call it. But the idea is that you have designated money set aside specifically for unexpected circumstances, like when:  

• Your income falls short 

• A new expense pops up

• An unplanned cost threatens to ruin your budget

• You lose a client

Of course, the amount you should save for unexpected emergencies is highly individual, so consider how much cash you’d need to feel safe and secure. 

Don’t Let the Hidden Costs of Running a Business Derail Your Budget

Running a business is about more than just delivering the products or services you sell. In order to succeed, you have to be able to manage your finances well, too. That’s not always easy when unexpected costs seem to pop up all over the place. But the hidden costs of running a business don’t have to derail your business budget if you take the time to plan for them. 

If planning your business budget feels intimidating or overwhelming, you don’t have to do it alone. As a financial coach for small business owners, I help people like you feel confident and in control of your business finances. To see how we can help you and your business, email us at info@financialfitnesscoaching or simply schedule a free 20-minute Discovery Call on our calendar.