Huge Expenses That Can Bankrupt Unprepared Startups

By Dainis Kanopa. August 1, 2018

Expenses That Can Bankrupt Image

Establishing a startup business takes a lot of courage🧠 and money💰. This 2018, more people have grown interested in launching a startup but with very little knowledge. Unfortunately, due to this lack of knowledge and preparation, new businesses easily experience failure. Around two-thirds of new companies survive their first two years. It is reported that only around 50 percent of new business ventures can keep up for five years – the culprit: problems in cash flow💸. According to a study by the U.S. Bank, 82 percent of businesses fail due to the improper management of funds📉.

Many people are aware that it takes a massive amount of cash for a startup to be launched and get operational. However, entrepreneurs risk the probability of going bankrupt for underestimating the huge expenses that they need to cover. If you are planning to launch your startup, I strongly suggest you study these big expenses first:


#1 – Legal expenses

Legal Expenses

Entrepreneurs will need the assistance of a lawyer when it comes to dealing with various legal matters 👨‍⚖️. Aside from assisting you with the formation and incorporation of your startup business, lawyers can also help you protect your company’s intellectual property. They are valuable assets for entrepreneurs especially when it comes to overcoming legal obstacles in their way to success. However, their service fees come with a price tag, and they are not cheap. To save money for legal matters, I suggest you search for online documents and templates to provide you a head start🌐. These include form contracts, terms of service, and operating agreements, which can you can find on the internet through a quick Google search👨‍💻. I make sure the documents that I need are at least 90 percent completed before I meet with a lawyer who will assist me in settling everything.


#2 – Tax Bill

While entrepreneurs are commonly aware that they need to pay taxes🏦, many are still surprised to find out the amount they have to pay. To reduce these expenses, you will need the help of an accountant👩‍💼 all throughout the year. An accountant can ensure you’re taking advantage of legal strategies to lessen your tax bill 📉. I realized that having a solid tax strategy will help you reduce your expenses when you reinvest in your startup yearly, so make sure you know how to strategize your tax expenses as well.

#3 – Loans and Other Types of Financing

Entrepreneurs left with no other choice but to opt for a loan to fund their dreams. While these loans may appear like a fast and easy way to infuse cash into your startup business, you must not forget to consider interest📈 payments. If you are planning to use loans or other financing vehicles, I suggest you read the fine print first📜 and make sure you understand it before signing any agreement.

#4 – Shrinkage


Startup businesses may experience an unexpected amount of shrinkage🕵️. To prevent shrinkage, you need to identify where your products or services are most vulnerable to shrinkage. This dilemma can happen due to errors, employee theft or shoplifting. I highly recommend you invest in preventive measures such as installing closed circuit television (CCTV)📹 cameras for your retail shop or proper auditing system for your eCommerce business to minimize errors and missing products.


As an entrepreneur, you need to stay committed to launching🚀 your startup business. This means working for long hours, sacrificing time for your loved ones. Time plays a vital role in establishing your business, and you have to use it wisely so you can still have time for your relationships. As an entrepreneur myself, I have realized that time management and preparation are everything. You need to find a balance between your work and personal life and prepare for what’s to come. By having proper time management and preparing well for the necessary expenses, you can ensure that your startup will be a part of the one-third of businesses that celebrate their ten-year mark😊.