Heads Up! Keep These Unforeseen Startup Costs In Mind When Scaling


Founders often keep their idea and vision at the top of the priority list — at the expense of smart budgeting. While not as exciting as the potential long-term market or product timeline, all the costs need to be taken into account from the beginning when building your company — from overhead costs to knowing when it’s time and how much it will cost to outsource help.

“There are two things really finite in the startup world: time and money,” says Brad Ebenhoeh, managing partner at startup-focused accounting firm Accountfully. “Time is where the intangible hidden costs come into play. Money is the tangible hidden costs; for example, hiring talent. You need to make sure that you’re not wasting either of those.”

Ebenhoeh breaks down the different tangible and untangible costs you should look out for while considering budgets and funding.

The hidden costs of labor

These costs are specifically related to payroll. When you bring new employees on, there are various hidden costs. Aside from salary, you have to take into account payroll taxes, health insurance, worker’s compensation, equipment that the employee is going to be using (computers, office supplies, etc.), and per-person licenses for software. Depending on your startup, overhead costs such as office space and amenities will come into play too.

“When that employee comes on, you have all of these other aspects that relate to that employee’s work experience at your company,” explains Ebenhoeh.

The opportunity cost of lost time

“There’s so much stuff to do as a business owner, what are you really able to focus your time and efforts on to be the most efficient and properly serving your company?” asks Ebenhoeh.

Opportunity cost may include time spent training employees, building your product, raising money, or in sales and marketing. It’s about spending your time and energy on several things that move your business forward, without wasting any time.

“If you don’t spend it [time] as efficiently as possible to grow your business, related to your skill set, then that’s a huge time cost for your business,” says Ebenhoeh.

You really do need it — legal and accounting

There are legal requirements for your business, including taxes and business licenses. Keep a legal source on hand to help you go through those hoops and set up the business the right way. Once you start scaling past the founders, you’ll also need an accounting resource to handle taxes, payroll, and future funding allocation and KPIs.

What additional expertise do you need? That costs, too

“How do I prioritize my time? From an intangible standpoint, you should prioritize your time based on your skill set. As a startup founder, you need to make sure you are focusing on sales and business development so you can grow your startup, not on accounting or getting a business license,” says Ebenhoeh.

Whether your expertise is programming, marketing, or business development, you may need to bring in the missing piece of your startup to complement your skill set. If you’re good with people and closing deals but not a technical person, maybe you need bring in a good technical partner to complement you.