The Six Hidden Costs of Starting an Online Business


On average, starting an online business can be far less expensive than a traditional up-start. Taking this into consideration, you’ve decided that your modest capital will take you further in cyberspace than the “real”
world, but don’t assume that online businesses aren’t fraught with their own hidden expenses. You’ve
factored in the cost of web design and advertising, but what about employee insurance or the price of credit card processing? Here are six of the hidden costs that come with establishing an online venture.


Legal Fees


Copyrights, LLC, corporations, trademarks and non-disclosure agreements: if you’re planning to sell anything over the internet, it’s critical to understand the legal ramifications associated with running even the smallest online business. Savvy legal representation is critical, especially in the beginning, and making sure you’re doing everything by the book can cost you anywhere from $125 to $300 per hour in legal fees alone. Before making any arrangements with an attorney, ask about his experience dealing with structuring a small online business and if the fees are negotiable. Establishing a strong relationship with a lawyer will also come in handy down the road, if you’re ever embroiled in a legal battle with a disgruntled customer, or worse yet, the IRS.

Technology


You’re a crafty sort who has decided to sell your homemade brownies/stocking caps/mailbox covers from the comfort of a home office. Your website is ready to go, and you assume that the inexpensive modem and router you picked up at a nearby big box retailer will be enough to handle your website’s traffic. Fast forward several months and your modest online business has transformed into a booming success, complete with several crashes and unhappy customers. As your business expands, and your website traffic increases, it’s important to purchase commercial-grade equipment to handle the expanding interest in your business. You’ll also need to invest in a quality fax machine, printer, copier and you may even want to consider hooking up a landline phone again, should you offer customer support.

Credit Card Processing


People shop online for two reasons: bargains and convenience. If you’re selling anything online, you must hire a merchant services company to handle your credit card transactions. Aside from the added peace of mind, a reputable merchant account provider can turn a potential logistical nightmare into a successful and quick way to receive payment from your customers.

Utilities


Your online venture is beginning to expand well past the confines of your suburban home, necessitating the move to a commercial office space or warehouse for the overflow merchandise. If this is your future, get ready to factor in several expenses beyond rent. You’ll need extra cash for heating, cooling, water bills, lighting and other incidentals required to keep your merchandise and technology in good shape. Maintenance and Repairs

Technology is constantly evolving, but unfortunately it’s also constantly breaking down. Your computers, smartphones, fax machine and modems are the core of your little business, so what happens if the equipment suddenly breaks? You cannot afford to stay down for more than a few hours, so don’t forget to set aside money in your budget to repair, or altogether replace, any damaged or malfunctioning equipment. If you also plan on moving into an office space, the cost of repairs and maintenance skyrockets.

Hiring Employees


English satirist John Donne once wrote “no man is an island” and in the world of online business this basically translates to “someday, you’re going to need to hire an employee!” No matter if you’re planning to take on one or 20 employees, it’s important to understand the legal implications. Beyond the employee’s salary and sick leave, the biggest expenses are insurance and any other employee benefits you plan to offer.

Once you sit down and realistically crunch the numbers, you’ll realize it’s the added expenses and unanticipated headaches that take a bite out of your projected profits. As a rule, budget at least 20 percent of your overall revenue to cover all of these, and the many other, unexpected costs you’ll encounter during your adventures in the owning a small online business.



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