A couple sits side-by-side at a table scattered with papers. The woman on the left, who has long silver hair, uses a pen to point at the screen of an open laptop. The man on the right, who has a salt-and-pepper beard, is holding a paper in his left hand and holding his right hand over a calculator.
Even if your business is run out of your home and you save money by not renting office space, you can run into unexpected costs in other areas. — Getty Images/Inside Creative House

When starting a new business, most experts recommend building a comprehensive first-year budget — and then adding an extra 20% for unforeseen costs. Even best-laid plans can sometimes go awry; having an emergency fund set aside as you launch your business can help ensure you are able to open and accept customers. Here are some unexpected costs you may face when getting started.

[Read more: How to Determine Your Startup Costs]


Shrinkage is the term that describes when you lose product without earning any revenue from selling it. Shrinkage generally occurs from four common sources: Employee theft, shoplifting, paperwork errors and supplier fraud are all the major reasons why your balance sheet might not match inventory. There’s also a fifth category of shrinkage, which encompasses all the unknown reasons for loss. This is the black hole that things seem to disappear into for no reason.

In the retail industry, the average shrink percentage is estimated to be about 2% of sales. All that adds up to an estimated $45 billion per year in the United States alone. But it’s not just the retail industry that needs to worry about shrinkage. Offices can experience loss of supplies (think: printer paper, pens, chargers, etc.). Restaurants face shrinkage all the time when ingredients run out faster than chefs can cook.

Software fees

There are many tools you need to run your business, and licenses for these tools can quickly creep up on your profit margin. Fees for CRM software, accounting software, a POS, sales tools, a domain name, an e-commerce site and even productivity tools like Asana can add up before you realize it. Even purchasing more storage for your Google Workspace or Apple iCloud can start to eat into your bottom line over time.

[Read more: 6 Strategic Ways Businesses Can Cut Tech Costs]

Budgeting for customer service costs depends on a number of factors. Consider the cost of customer acquisition in relation to the cost of customer retention.

Business insurance

Starting a new business is risky, which is why having insurance can be a good idea. New business owners can access general small business insurance, liability insurance, errors and omissions insurance, workers’ compensation insurance, property insurance and cyber insurance. These different types of insurance each have their own cost to consider.

“How much you spend on a given policy is based on numerous factors, including the type of business, size of the business, industry, location, revenue, previous issues, present risk factors, and number of employees,” wrote the experts at Due. “You can easily spend $1,000 or more per policy per year.”

Analyze your business risk before deciding which insurance policies are worth investing in.

Customer service

Great customer service is the bread-and-butter of any successful business. It’s critical to get your customer service right as you get started — unfortunately, that can also mean lots of unplanned costs.

Customer service is a tricky thing for which to budget. There are upfront costs, like the cost of installing a customer service phone line or feedback tool to manage customer requests. There are expenses associated with accepting returns and providing product exchanges. But there are also hidden costs, like the time it takes you to resolve a customer’s issue or the lost revenue that comes from high customer turnover.

Budgeting for customer service costs depends on a number of factors. Consider the cost of customer acquisition in relation to the cost of customer retention. It’s generally true that the cost to retain a customer is less than the cost to gain a new one. If you’re spending a majority of your time fielding customer complaints, however, you may need to look at your store policies, ordering process and customer experience to find ways to bring customer retention costs to a reasonable level.

Administrative costs

Even if you decide to launch your business from a home office, there are unexpected admin costs that can pop up along the way. These costs include things like utilities, Wi-Fi, phone data, printing and mailing costs, equipment (such as headsets or computers) and office supplies.

Many business owners take these costs for granted, especially when working from home. Moreover, it can be hard to differentiate an expense like utilities into a business cost versus a personal cost. Keep an eye on your household budget if you’re launching a business from home to make sure some of your normal expenses don’t suddenly increase.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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