March 13, 2020 Last updated March 13th, 2020 1,449 Reads share

The Hidden Costs of Running a Business

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Some business books will talk about the power of the beer mat – and how this small item is enough to note your income and expense calculations on.

While you might get away with such an approach when you initially devise your business strategy, over time this just isn’t going to cut it. There are all sorts of hidden costs that enter the picture when you run a business, with many of these having the potential to cause a catastrophe if they are not managed adequately.

Bearing this in mind, today’s guide is going to take a look at some of these hidden costs. Granted, we probably won’t tick everything off the list, but if you can at least be aware of some of these it will do wonders for your businesses’ prospects.

Your Office Space

In the early days, you might not need an office, but as time progresses you will hopefully require this space.

Unfortunately, it comes at a premium. Some people might opt to look at the cost of personal storage, but in reality, this is an interim solution. You will need office space and when we talk about hidden costs we’re not just talking about the rent either. As soon as you start to rent premises there are all sorts of other costs, whether it’s insurance (more on that later), or simply the cost of electricity for your building.


We’ve just touched upon insurance, but there are so many different types of it that it deserves its own section. Building insurance is one element, but if you work in certain industries you might also need professional indemnity insurance. Then, what about public liability insurance? In truth, the list could go on, but it’s a cost that is rarely budgeted for and can make a difference.

The Cost of Employees

We all know that employees demand a salary, but few of us stop to think about what other costs that they prompt. There are also pension costs, insurance, tax and if the size of your organization demands, the cost of human resources as well.

All of these costs are often ignored, even though they can have a monumental impact on your bottom line. This is why it is crucial to ask yourself some key questions before you take the plunge to make a hire.


This is something that you all might be used to, but it goes without saying that the rules turn on their head when it comes to businesses and tax. The rates are different but perhaps more importantly, you have to calculate everything yourself.

This can be a really dangerous game for a lot of young companies. They can coin in the profits through the year but fail to realize that they have to pay tax on these earnings at the end of the year. Just remember that nobody is sat above you who can calculate and pay for these tax commitments – this is all down to you, and you simply cannot forget.

Professional Software

This can be a really surprising topic for a lot of people, as software can prompt some eyebrow-raising costs. Sure, you might have seen certain software advertised at ‘$x’ price – but what about the cost for commercial reasons? Like it or not, you are now a commercial entity, and software companies are keen to get a slice of the action. Some of them will charge the same regardless of your status but be aware that many will charge more for those who are looking to profit from their software.

This doesn’t just apply with software either, and another example could be graphics or imagery. They might be free for personal use, but as soon as you consider them for anything commercial your costs can start to balloon.

Your Time

Again, this was probably one of those hidden costs that few of you were expecting. Time is something that very few entrepreneurs factor in though. They just look at their tangible expenses and don’t realize that they are spending a lot of time on tasks. Unfortunately, when it comes to your own business, the old saying of time being money is absolutely correct.

Shrinkage (This Can Be the Killer)

Finally, let’s talk about shrinkage. This is a term that you may not have come across much but as soon as you enter the world of business, you’ll know all about it. It covers everything from the theft of items, right the way to administrative errors. In other words, it’s all of those costs that you just couldn’t legislate for. These costs certainly don’t amount to a small figure either; with some estimates suggesting that they cost the US economy billions of dollars every year. As a rule of thumb, you need to factor in a contingency for shrinkage into your annual costs