Top Unexpected Expenses for Small Business Owners
True or False: When I started my business, I knew all the business items I would need to pay for.
If you would’ve asked me this on day one, I would’ve said a matter-of-fact, shoulder-shrugging yes. Ask me today, years later, and I can say with full confidence that this statement is false. I had no idea! If you’re new to business ownership, take comfort in the fact that no one has all the answers in the beginning. Which, I think, is part of the fun of entrepreneurship.
When it comes to money, many business owners tend to tense up and clench their teeth. Ignoring finances is an all too tempting option. The fact is, it’s not if you have an unexpected expense, it’s when. For those small business owners who aren’t giving the proper attention to financial planning and budgeting, an unexpected expense only adds to their debt.
Take it from me, learning along the way is fun, but being prepared keeps it fun. I’ve outlined some common unexpected business expenses that you might encounter. Whether in timing or cost, anything unexpected can throw you a curve-ball. Keep these items on your watch list as you venture into the business world.
1. LLC, Trade Name, & Trademark Filing
One of the most exciting things about starting a business is coming up with the name. There’s nothing like seeing an official letterhead or website title with your business name in beautiful bold font. Did you know there’s more to simply choosing a business name? Depending on the structure and size of your business, you will need to file a trade name or LLC with your state. Much to the surprise of many new business owners, this isn’t free!
This expense can be as little as $10 for trade names and up to several hundred dollars for trademarks. If you’re on a new business budget, you know that every expense adds up, no matter how small. My pro tip is to do some research before you submit your legal business name filing. Search both LLC and trade names to verify that your name is available to avoid having to submit an application fee more than once.
Once your business is more established in your industry, you might consider filing a trademark. For example, if you have a particular phrase or tag line that you want to own exclusively, then you would file for a trademark for that particular group of words. A trademark is more expensive and can cost between $200 and $300, plus legal fees if you’re using an attorney. The good news is that you can plan for this type of expense and save up for it every month with a line item in your budget.
2. Education & Certifications
Education looks a little different when you’re a small business owner. I’m not talking about college degrees, here. As you know, it’s important for business owners to keep learning and growing within their craft. You may have seen me share recently that I was in the process of getting certified, and now am a Certified ProAdvisor with QuickBooks. This is just one example of an education expense. Now, this might not be an unexpected expense in the sense that you didn’t plan for it, but you might be surprised to discover how much this type of education costs.
If you’re not able to afford learning courses right away, don’t let that stop you from researching potential costs ahead of time. Some examples of business education include:
New Software Training
Joining a Networking Group
Luckily, there are tons of free education courses available to small business owners. I encourage you to check with the Small Business Administration for free business courses. Another option is to follow business and marketing educators on social media. Many of them offer free webinars that provide knowledge, community, and motivation all in one.
3. Professional Fees
It’s nice to know that there are professionals out there to help with all the stuff you don’t want or know how to do. Professionals help small businesses every day with accounting (that’s me!), legal services, construction for brick and mortar stores, setting up wifi, website development, and so much more. Many small business owners learn this lesson the hard way, but simply put, hiring a professional is an investment in doing it right the first time.
It can be tempting to try to do it all yourself, but this could end up costing you more in the long run. For example, many business owners decide to manage their own bookkeeping in the beginning stage of their business. I think this is great! However, without the proper research and planning, come tax season you may find yourself face-palming in frustration when you see your tax bill.
This unexpected business expense may end up costing you the most. There are many scenarios when a small business owner suddenly needs to purchase some type of equipment. Whether it’s to provide a more seamless purchase experience for your customers or to replace your laptop that decided it didn’t want to play nice anymore. There are many items that are necessary to run your business. When they break or become a hindrance to making a profit, it becomes urgent and necessary to replace them.
Depending on the type of equipment, you could be dishing out upwards of a couple thousand dollars. One thing here, another thing there, and you could be staring at a credit card balance way higher than you can handle. It’s inevitable that something like this will come up. Being prepared will help alleviate some of the shock of having to shell out a large amount of money for something you didn’t really plan for.
5. Social Media Advertising
As small business owners, we are blessed with the gift of free marketing tools. I’m talking about Facebook, Instagram, Twitter, and Pinterest! Oh, and don’t forget LinkedIn! It has never been easier for a business owner in any industry to build a brand and connect with their target audience. However, did you know that it costs money to advertise on these social media platforms? Using them as a free tool is a tactic that many small business owners use to start, but once you realize the potential reach of paid advertising, it’s a no-brainer.
One of the great things about social media advertising, Facebook ads in particular, is that you have control over how much you want to spend. Because of this fact, social media advertising is one of the most affordable marketing tools for businesses. Basically, you set your budget and the top amount you are willing to spend. Then, Facebook takes the ad and shows it to people who would be interested, never going over that top dollar amount.
On average, you might expect to spend around $1,000-$2,000 a month on Facebook advertising as a small business. If you’re considering using this power tool, make sure there’s enough room in your monthly marketing budget to experiment and learn the ropes first. Or, you might consider hiring a social media professional, which would add on professional fees on top of your advertising budget.
“If only I didn’t have to pay taxes!” Almost every small business owner has had this thought and much worse when it’s tax season. Oh, taxes. Well, I don’t mean to add fire to your fury, but did you know that it’s always tax season for small business owners? Many business owners don’t know this, especially when they’re first starting out, which can result in tax penalties or professional fees when you have to hire an accountant to help you straighten out your books.
Some finance experts recommend the 30% rule. This means that you would set aside 30% of your income for taxes. My accounting philosophy, however, is that everyone’s books are different. The 30% rule might work perfectly for one business, but it might completely fail for another. A custom approach provides a more in-depth analysis to ensure you’re not surprised every quarter when you pay your taxes. Quarterly?! That’s right, I said quarterly! Not sure what I mean? Let’s talk.
To recap, these are the six unexpected expenses for small business owners to watch for:
LLC, Trade Name, & Trademark Filing
Education & Certifications
Social Media Advertising
Interested in learning more about my accounting services? Check out my services page for more information. Ready to dive right in? Schedule your free 30-minute introduction meeting with me to talk about your accounting needs.