The Hidden Costs of Running a Small Business

small business

We all know that it takes money to make money. You need to invest in product development, marketing and employees if you want to have success. But considering that poor cash flow management is still the number one reason small businesses fail, it’s safe to assume that not all entrepreneurs are accounting for each and every expense that is associated with running a business.

There are lots of other things you will need to pay for that don’t always make themselves known, and these can eat away at your profit margins and put you in a really difficult position. So to help you prevent this from happening, here are some of the hidden costs of running a small business you should be worried about and managing.

Employee Perks and Benefits

When we think of the cost of hiring people, we tend to think only of the salary that we pay people. But this represents only a fraction of the cost of labor. There are many other things we need to be paying attention to so that we can fully understand just how much we are spending.

Specifically, we need to be thinking about the cost of benefits. Health insurance plans are required by law in some states, but they are also something that most employees will expect. Plus, a lot of people these days want to see employers offer them ways to achieve more balance, whether this be through an on-site fitness center, wellness classes, flexible scheduling, etc. And another perk that costs money is professional development. People want to learn and grow on the job, and you need to figure out how you’re going to pay for people to have that opportunity.

And there are other smaller things to think about. Office parties, break room coffee, food, etc. are all great things to offer, but if you just hand things out, then your expenses can get out of control quickly. It’s best to set a budget for this stuff and stick to it. And this is much better than offering things and then taking them away.


Another labor-related expense we tend not to think about is recruiting. In general, it around $20,000-30,000 to recruit a manager who will make $40,000, which is an astronomical number. It’s calculated by adding up all the time and resources it takes to promote new positions, review resumes, interview people and onboard them. If you don’t account for this, then you’re going to be in trouble.

This is why it’s so important to focus on employee retention strategies. By implementing initiatives designed to keep people around, you’re reducing your need to be constantly recruiting, which will help you keep these costs down. Of course, people will always leave, so be sure to have a recruiting budget. But there are ways to make sure this aspect of the business doesn’t sink you before you even get underway.

Office Supplies and Utilities

Most of the work you do will be on computers, but this doesn’t mean you won’t have any office supply needs. Pens, paper, printer ink, sticky notes, markers, etc. are all important to the functioning of a business, but they are certainly not free. You can get a discount for buying in bulk, but this expense can still put a significant dent into your margins.

The best thing to do is to work to build a culture focused on reducing waste. Often times people are less responsible with company supplies because they don’t think it really matters. But if you let people know that their efforts to conserve help the company achieve its goals, then you’ll likely get more buy in from people, making it easier to reduce waste and save money.

This type of strategy also works because it stops people from feeling micromanaged. No one wants to feel like someone is counting how many pens they use. But if they are conscientious of their supply use, then it feels like a decision they are making on their own, which will always be more effective than a directive from above.


They say the only two certainties in life are death and taxes. And while this is a bit morose, it’s most certainly true. However, small businesses often get in trouble because they are not fully prepared to pay their taxes, or because they end up paying more than they need to.

Tax codes are complicated, and there are often many deductions you can claim so that you can reduce your tax bill. However, if you don’t have a professional looking at things, than it’s easy to overlook these deductions and pay way more than you need to. So if you don’t have a full-time tax accountant, consider hiring one on as a consultant so that they can help you be more efficient and reduce your tax burden.

Always Be Vigilant

Part of the secret to running a successful business is remaining vigilant at all times. Don’t let any of your expenses get away from you, and make sure you’re constantly looking for how you can streamline and optimize. This will help ensure expanding margins as you grow, making your business more profitable and successful over time.

Kevin is the founder and CEO of Vast Bridges, a customer acquisition and lead generation business that helps companies in many different industries develop and implement a strategic growth vision. And in addition to Vast Bridges, Kevin also runs Broadband Search, a service designed to help people find the best value internet service provider in their area.
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