5 Hidden Costs of Running a Digital Business

Starting a digital business has never been easier – it’s also never been easier to get derailed by hidden costs of running that digital business.


hidden costs of digital business

So, you’ve decided to start a digital business.


You’ve made a choice to tap the power of a connected world using the advantages provided by the internet and internet-based technologies.

With as easy as it has become to get a new digital business off the ground, a lot of entrepreneurs are forming new businesses that solve old problems with advanced tools and techniques.


A growing misconception about running a digital business is that it can be done without any upfront investment.

After all, you just need a computer, a reliable high-speed internet connection, and some know-how, right?

Not necessarily. As it turns out, running a digital business effectively requires a lot of moving parts, and not all of them are completely without some kind of cost. Because these costs can seem to spring up from out of nowhere, a lot of digital business owners consider them to be ‘hidden’.

To help your digital business avoid getting sidelined by unanticipated business operating costs, be mindful of these five areas where unexpected expenses are likely to crop up.


Hidden Cost #1: Domain Hosting and Email


Did you think that all you had to do to get your website up and running was design it?

The reality is that a great website needs not only great design, but reliable, dependable hosting as well, so that it can be served up to site visitors. Without a domain hosting company like GoDaddy or Google (who partners with Wix for site design), your sharp-looking website isn’t going anywhere.

And, with that premium hosting can come premium price tags. Even though rates vary, you can expect to pay between $10-$15 per month for domain hosting and that’s just for basic service.


Along with a snappy new website, your digital business is going to need company email. “Why can’t I just use Gmail?”, you might ask. Technically, you could, but there are at least two great reasons not to:


  1. A free Gmail account doesn’t allow you to assign more email accounts to multiple users, each with their own permissions. So, scaling your digital business to anyone beyond yourself will quickly become a problem.
  2. A free Gmail account is always going to end in ‘gmail.com’. This doesn’t bode well for your branding and company image. Getting an email account that you can use with your website domain involves a slightly extra expense, and you’re probably going to want to pay the additional $5 per user per month for Gsuite.


Generally speaking, it’s a good idea to get your domain hosting from the same company that is providing your business email. This is so your website and email functions are as seamless as possible, and issues with either can be addressed by dealing with one company instead of two.



Hidden Cost #2: Communication Platforms and Software

zoho multi channel sales software

Regardless what kind of digital business you’ll be running, there are likely to be communication platforms or specialized software packages that you’ll need in order to be successful.

Keeping track of customer inquiries, orders, returns, and project management tasks can quickly require more than just emailing back-and-forth and the occasional conference call.

Running a digital business can get complicated fairly quickly, and it’s easy to start watching important items fall through the cracks as disorganization sets in. Thankfully, many high-end Customer Relationship Manager (CRM) platforms like Zoho and online collaboration tools like Trello offer free trials.

However, to really use them to their full advantage, you’re going to need the premium, paid subscription service.

The purchase of certain software packages may be needed, to, and it’s possible that you won’t anticipate this cost until you’ve realized that you can’t grow your digital business without it. To help reduce the ‘pain’ felt by the costs associated with buying software for your business, don’t forget to keep all of your receipts for your purchases, as many software expenses for business purposes are eligible for tax deductions at the end of the year.



Hidden Cost #3: Licensing and Permits


Do you plan on running your digital business from home?

Some city or county governments make home-based businesses acquire a Home Occupation Permit in order to operate legitimately.

Even if you don’t plan on running your digital business from home, it’s still likely that you’re going to have to pay for a general business license, which must be renewed each year.

Then there are professional or occupational licenses that may be required for some businesses that function in highly regulated industries like corporate finance or accounting.

Lastly, there could be alarm permits or health inspection certificates which may be required, even if you’re the only employee and 100% of your business is conducted online. It all depends on where your business will be established and under what governing laws and codes.



Hidden Cost #3: Insurance


You may think that, because your business won’t be operating in a brick-and-mortar location, you won’t be needing casualty or liability insurance.

However, once your business starts growing and assets begin to increase in value and complexity, you’ll soon realize that you have a lot more to lose than to gain by not having watertight insurance coverage.

Average business insurance costs about $1,300 per year, which is a small price to pay for peace of mind.


General liability insurance, product liability insurance, and even business interruption insurance can all have their rightful place within the monthly budgets of digital businesses. As with many other types of business expenses, insurance premiums can be categorized as a tax deduction, so be sure to keep track of them.



Hidden Cost #4: Contractors and Employees


Paying your contractors or employees their wages represents only one type of labor-related expense that you can count on incurring as a digital business owner.

Any time you contract with an outside person or party to have work done and the total amount of compensation paid goes above $500 in any given year, you’re responsible for collecting tax information from the contractor and treating them like a W9 employee.


What’s more, if the amount of time they work for you exceeds a certain number of hours in a given week or month, you could be required to treat that worker like a full-time employee. This comes complete with all of the worker’s compensation insurance and state-regulated employment requirements that are part-and-parcel of that kind of arrangement.

These unforeseen expenses can seem to come out of nowhere, so be sure to know what your state labor laws are, and know their limitations.


Hidden Cost #5: Advertising and Marketing

It’s one thing to bootstrap a digital business and get the word out about it by yourself. But, this will only take you so far, and you may soon find yourself with a need to increase your investment into sales and marketing.

There is a plethora of ways you can go with this particular business function, from attending trade shows to developing direct mail campaigns.


For the most part, you get out of marketing and advertising efforts what you put into them.

So, to see the highest level of success, you’re invariably going to have to spend more money to generate brand awareness and market adoption. The good news is that this can still be done on a budget, and it might be worthwhile to engage with a marketing consultant to determine which path might be best for your organization.



Patience + Diligence = Profits

Growing a digital business takes time as much as it takes money. Great digital businesses don’t become raving successes overnight. A lot of calculated strategy and smart planning goes into launching the best digital businesses. You can learn a lot from the failure of others, and what causes so many digital businesses to fail is their inability to manage the growing expenses that come with scaling a business.


Conversely, what helps great digital businesses thrive is their disciplined attention to containing costs, which is why it’s so important to stay on top of these all-too-often ‘hidden’ business costs.