Side businesses can be a great source of extra income, as has been well document on this blog (here are two great articles from the community on it: but there are several hidden expenses that can suck life out of your cash flow. For the last several years I have run a number of side projects and run into these hidden expenses time and again.
1. Software As A Service fees adding up
Software as a Service are software products that instead of paying one time for them, you pay smaller ongoing fees to be able to use. They are great initially for a business as you can save on the upfront cost and pay $10-$100/mo for ongoing use of them. At the same time, these fees start to add up and can really take a hit out of your cash flow. What to do? Look at the one time cost of similar software and evaluate your time period needed to break even if you were just to buy it outright. It may cost more upfront, but can lower your ongoing costs tremendously.
2. Transaction Fees/Bank Fees
You send an invoice via paypal. Your customer pays. Paypal takes their cut. You have a client wire their payment to you. The bank takes a cut. You charge your clients credit card. Your credit card processor takes a cut. These transaction fees can add up to some significant cash flow drain over time. How to make it? Weigh your best options and then provide pricing adjustments that take in to account the various transaction fees.
3. Sloppy Books/Calendaring
Keeping sloppy books, not tracking tax payment dates can really eat you up in late fees/penalties. Sloppy books can also increase your charges with an accountant when it comes time to pay your taxes. What to do? Hire a bookkeeper. They are pretty cheap and allow you to have the peace of mind that things are taken care of and you avoid excessive late fees.
4. Improper insurance coverage
More than likely you need insurance for your business, but overpaying on insurance because of the brand you choose or the policy you have can add on to your expenses in unneccesary ways. Insureon publishes reports that let you see what other similar size businesses get in the way of coverage and this can help you determine if you have the right policy.
5. Spending too much time researching
This one is counterintuitive, but some times you can spend too much time researching a product or solution for your business in hopes to save some money, when really it would have been more cost effective to spend a bit more, but save time that could be used on focusing on client sales.