Business startup costs that shock new owners |
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Taxwise, Fred may be in better shape. Joseph Anthony is an enrolled agent -- a tax preparer and consultant authorized to
appear before the IRS -- in Portland, Ore. He specializes in tax planning for individuals and businesses. Anthony says the good news for
Fred is that his success or failure has nothing to do with his tax situation.
"If he entered into and works at his business with the intention of trying to make a profit, then all of the expenses related
to being in business are going to either be deductible or depreciable," Anthony says. "Government doesn't punish you for being a bad business
person. They punish you for trying to deduct expenses that are not business expenses or claiming you have a business when what you have is
a hobby."
2. Even the tiniest delay at launch can cost big bucks
Steve Mock, CEO of Giftventure.com, says early feedback from user trials of the online company's Web site complicated its launch. The result:
a six-week delay in going live. "The cost associated with the delay included all the other (expenses) in my company," says Mock. "Our customer
service person, for example, was (paid) for six weeks and we didn't have any customers since we didn't launch."
Expert advice: Darrell Zahorsky, small business information guide for About.com and author of an
upcoming book on starting a small business, says to prevent startup costs from spiraling out of control,
entrepreneurs should do the following:
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| How to keep costs under control |
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"Remember the three-by-two rule: Any new launch or startup will take twice as long and three times the cost than assumed,"
Zahorsky says. He advises new business owners to plan for contingencies. "Every entrepreneur has high hopes and expectations, but smart
entrepreneurs prepare for the downside."
3. Businesses
pay more for the same services as residential customers
James Hills, president of marketinghelpnet.com, says that when he and his wife moved their small company out of a home office and into a "real"
one, they were astonished at how much more the same level of service cost once it went commercial. Hills says his Internet contract alone
increased from $49 to $79 for the same basic service. Phone fees also increased.
Expert advice: When looking at business options, analyze your anticipated use, and then look for
cheaper alternatives. Kirk says Voice-over IP, or VoIP, phone services offer big-company benefits at a fraction of the cost.
"One of the drawbacks of VoIP is that if you lose your Internet connection, you also lose your phone," Kirk says. "(VoIP) isn't
recommended for those without reliable service." She also points out that using a lot of bandwidth can result in degradation of call quality.
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