6 Hidden Costs When Starting an Online Business

Starting an online business might sound cost-effective compared to a physical business but there are still costs to factor in before you can start to make a profit. Some of these, such as the cost of the product you want to sell are obvious, but you should also be aware of the hidden costs involved as it might turn out to be a more expensive venture than you thought.

The hidden costs of starting an online Business   

Permits and Licensing 

You can’t afford to neglect permits and licensing just because you don’t have a physical business and they can be expensive. You may need to obtain an occupational license, a general business license, or a weights and measures license. These can eat into your profits but if you are sued for not having the correct license, the cost can put you out of business.


You have probably factored in the cost of buying hardware but how about the software, platforms, and web hosting? Your website and e-mail have to run efficiently as you won’t get any business if they don’t. These things don’t have to cost you a fortune, but you still need to factor in the cost.


A lot of people forget that just buying the technology is not enough, you also need to buy the software that you’re going to need. This is going to include things like antivirus software, bookkeeping software, and even website live chat software. Some of this is free to use, whereas others can be quite pricey, so it’s always good to look around and see what deals you can get at any given time.


You won’t make a lot of money if nobody knows your business exists so you will have to factor marketing and advertising costs into your initial and ongoing outlay. Research your target market to decide on the best places to advertise. Your strategy may not cost you the earth depending on your target audience and where you aim your marketing but if you want to generate a lot of business it can get expensive.

Transactional Costs

You will usually be expected to pay a transaction fee if you are taking payments by credit card or online. This is a small fee but if have a lot of transactions running through your business it can soon add up. Of course, this is a nice problem to have because it means that your online business is popular, but you do need to account for these costs as they will eat into your profit.


Insurance is still important even if you don’t have physical premises to insure. Things can still go wrong such as a disgruntled customer wanting to sue you or your products getting lost in the shipping process.  It could be that an employee is injured when being sent out on an assignment (online businesses aren’t always 100% virtual in everything they do), and this can lead to compensation and future payment management over time.

There are several types of business insurance that you may need depending on what type of online business you are running. Talk to a reliable business insurance agent to find out what insurance you need and to get it for a good price.


Don’t forget that you will have to pay taxes once you start making money. Businesses often get into the habit of enjoying their profits but then get a nasty shock when their tax bill arrives. Putting money aside from each transaction will mean that the blow won’t be as great when the tax bill arrives as you should have the money to pay it.

Hidden costs can be substantial so make sure you have factored them all in before you start your online business. This way you can accurately estimate if your business can be successful. 

Dan Smiljanić

Dan is a practitioner of project management and our resident geek. With a background in computer science, Dan is the lead product tester at Binfire. When Dan not writing code, you will probably find him cycling and hiking with friends.

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