Monthly business applications averaged 430,000 nationwide in November, according to the U.S. Census Bureau. This marks the 11th consecutive month of numbers well above the 342,000 in December 2020. While starting a business is exciting, it can also be more challenging than expected. And because about a third of businesses with employees fail in the first two years, according to the Small Business Administration’s Office of Advocacy, it’s important to gain every advantage possible.

Knowing the cost of operating your business is vital. Engaging business experts and practicing due diligence can stop you from being blindsided by industry-specific costs such as customs broker services, music streaming licenses and more.

Rent, utilities and equipment are well-known business startup costs, but there are less obvious expenses that can be overlooked.

Licenses and permits

You may have to register your business in the state and city where it’s located. The fees you pay can vary and may depend on whether you plan to operate as a partnership, corporation, nonprofit or limited liability company.

For example, in New Jersey, a for-profit LLC will pay a fee of $125 to register, Tennessee requires a filing fee of $300 and San Diego charges all businesses operating within the city limits $34 for a Business Tax Certificate.

Additional licenses and permits may also be required based on business activities. For example, a business selling alcoholic beverages must meet the requirements of the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau along with state and local regulations, and a business operating an oversized vehicle will often need a state permit.

Business insurance

Most businesses will need multiple types of business insurance, such as general liability, professional liability, commercial auto and commercial property. Some coverage can be bundled into a business owner’s policy to save money.

When you run a business from your residence, a home-based business insurance rider may be needed to supplement your homeowners insurance policy. If you have employees, don’t overlook workers’ compensation insurance, which is required in most states.

Business software

You will typically pay a monthly fee for accounting, payroll and other business software. If you select a point-of-sale system to take customer payments, expect to pay a processing fee for each debit and credit card transaction. This expense can be significant if your business has a large volume of card transactions.

Social Security and Medicare taxes

When you work for yourself, you pay a self-employment tax rate of 15.3% on your net earnings. That’s 12.4% for Social Security and 2.9% for Medicare. If you have employees, that cost is split between the employee and employer. As the employer, you contribute 6.2% of employee wages for Social Security and 1.45% for Medicare. Federal and state unemployment taxes are other costs you may need to include in your budget.

Every business is unique and the expense of operating it can depend on the industry, location, size, sales channel and other factors. To learn about the specific costs associated with starting a business, you may have to rely on the experience of others and your own research.

Talk with an expert

The SBA is a great resource. You can get free business counseling through partner agencies — Small Business Development Centers, Women’s Business Centers and Veterans Business Outreach Centers. The business advisors at these centers can help identify lesser-known costs of starting a business, such as grand opening expenses, training for employees and certifications for managers.

“If you’ve never run a business before, you have a huge learning curve,” says Richard Sifuentes, director of the University of Texas at San Antonio Small Business Development Center. If a person lacks industry knowledge, Sifuentes suggests hiring someone as a manager or staff member with experience in the area or taking a job in the field for a short period of time.

“One of the biggest mistakes people make is not budgeting three to six months of working capital,” Sifuentes says. This reserve of funds can be used the first few months of operation before the revenue from sales is enough to cover costs. An additional amount could be added to this reserve to cover any unexpected expenses, Sifuentes says.

Due diligence

If you’re purchasing a business, acquiring existing inventory or accepting the transfer of a liquor license, you don’t want to be surprised by back taxes, liens or other liabilities. Thoroughly research a company before moving forward. Information can be found by a title company if real estate is involved or through online searches and public records.

“You don’t want to get in a position where you are purchasing a business and now you are responsible for something the previous owner neglected,” says Marlo Richardson, founder of Business Bullish, a free online resource for people interested in starting a business.

“Be patient. Don’t rush through the process,” she adds. “It’s a very exciting experience, but it can also be a loss of a lot of money. Just take your time and make sure you go through everything.”

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