5 Costs Your Startup Should Not Skimp On


So much to do, so little money. That’s the sad story at most startups. Wildly ambitious but comically cash-poor, many entrepreneurs have to scrimp, save and scrap for years before they finally land that first big client or close that first public funding round.

It’s one thing to cut unnecessary costs. For instance, simply using efficient fixtures and lighting in your office can reduce your power and water consumption, reducing your company’s utility bills month after month. That won’t single handedly keep a flailing startup afloat, of course, but it can make plenty of difference around the margins.

On the other hand, plenty of startup expenses aren’t really negotiable. They need to be baked into your company’s financial calculus, no matter how painful it is to see those numbers on the page.

“Some business expenses are more important than others. Budding business owners need to realize that they absolutely can’t avoid certain investments, and to plan accordingly,” says Fergus Cleaver, accountant and equity partner at Auckland-based Cleaver Partners.

Here’s a look at five such expenses, in no particular order.

Accounting and Bookkeeping

When every dollar counts, you need to know where every dollar is going, period. Unless your business is very simple, DIY accounting and bookkeeping software like Quickbooks probably isn’t enough to keep your company’s finances in orders. Early on in your startup’s life, reach out to accounting professionals for advice. If you like what you hear, by all means establish a relationship with one. You’ll value the opportunity to seek counsel with an expert in the future, especially during financial rough patches.

Legal Support

Legal support is another business expense that’s unwise to forgo. And remember that you don’t have to keep a lawyer on retainer: using a contract lawyer or cloud-based legal service on an hourly or project basis is perfectly acceptable for early-stage companies, whose legal needs tend to involve pro forma activities such as articles of incorporation and operating agreements. The most important thing is to have a legal authority you can trust to give expert, unbiased advice on weighty matters.

Tax Assistance

Depending on your country of incorporation, your corporate structure, and your industry, the complexity of your tax situation is subject to variation. Just remember that looks can be deceiving: Even a simple tax situation can create unexpected headaches when ignored or managed incompetently. Without completely ceding control over your finances and tax profile, you need to work with or hire a tax professional that understands how to apply your jurisdiction’s rules to your specific situation.

Marketing and Outreach

Marketing and outreach operations defy generalization, especially in the startup phase. What your efforts look like on this front is less important than the fact that you actually make an effort. Relying on word of mouth only is a dangerous game, as many entrepreneurs learn the hard way.

Sales and Customer Service

It sounds like a chicken-or-egg conundrum, but it’s actually perfectly clear: before your company has any customers, it needs to have a customer service department, or at least some kind of customer-facing apparatus. This doesn’t have to be an in-house affair — it’s perfectly workable to outsource customer service. Ditto for sales. You can’t expect customers to give you their hard-earned money if they can’t even get someone on the phone.

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