Most new businesses don’t fail from bad ideas. They run out of cash before reaching their potential. Our experts explain why and how to avoid it.
Welcome to this week’s edition of Let’s Talk, where our experts discuss one of the most frustrating paradoxes in entrepreneurship: why profitable businesses still fail. You’ve got customers, you’re making sales, the reviews are glowing, so why is your bank account empty?
The truth is, most new businesses don’t fail because of bad ideas or lazy founders. They fail because they run out of cash long before they run out of potential.
This week, our experts tackle the real reasons behind those sleepless nights spent staring at spreadsheets. We’re talking about the hidden costs that never made it into your business plan, the timing gaps between paying suppliers and getting paid by customers, and the psychological traps that make us dramatically underestimate what it actually costs to keep the lights on. More importantly, our experts share the early warning signs that your cash flow is heading toward crisis and the practical steps you can take right now to turn things around before it’s too late.
Because here’s what nobody tells you when you’re starting out: running out of money isn’t always about spending too much. Sometimes it’s about not understanding where your money is really going.
Let’s Talk!
Aaron Bugal, Field CISO, APJ at Sophos
“New business owners often underestimate their attractiveness to cybercriminals, but their lean teams and tight budgets make them low hanging fruits for attackers. Ransomware alone accounts for 70% of attacks on small businesses and over 90% for midsized organisations.
While the financial risks of cyberattacks are clear, the hidden cost is often the burnout and high turnover among IT staff tasked with protecting businesses. Many SMBs don’t have dedicated cyber professionals, relying on overstretched employees to manage security. This quiet strain can erode a business’s resilience, creating unproductive environments or triggering turnover, leaving SMBs vulnerable even if their technology is up to date – a risk no business should be willing to take.
Therefore, SMBs need to make the wellbeing of their IT staff a priority. Regular check-ins, process improvements, and small changes can boost morale and strengthen defences.
For SMBs, the true cost of cybersecurity goes far beyond the bottom line. Real resilience comes from supporting your people and making their wellbeing a core part of your security strategy.”
Shaun Broughton, Managing Director, APAC and Japan, Shopify
“Starting a business is exciting, but many founders underestimate the costs that appear after launch. It’s not just the obvious expenses related to product, marketing or logistics. Technology choices can create hidden costs that compound over time. One of the biggest is technical debt—those early tech decisions that can’t keep up as you grow.
You can invest in a beautiful storefront, but if the underlying infrastructure isn’t flexible and scalable, systems quickly become harder and more expensive to manage. As your business grows and you add more tools or design new customer experiences, a rigid setup can turn into a liability.
Choosing a blended model that combines a customisable front-end with a full-stack back-end gives your business the flexibility to use pre-integrated modules alongside optional applications. This way, you can maintain simplicity while still having the freedom to change or extend parts of the ecommerce experience as market trends and customer preferences evolve.
Ultimately, by choosing scalable and flexible tech, business owners can cut down on maintenance, and save money and momentum in the long run.”
Ian Boyd, General Manager, Australia and New Zealand at GoCardless
“The biggest hidden cost that destroys new businesses is late payments. Most entrepreneurs budget for rent and staff, but never factor in the money they’ll lose waiting for customers to pay.
Our Pursuing Payments report shows new businesses lose an average of $1,328 monthly to late payments, with 17% losing over $2,500. Businesses spend 50 hours annually chasing overdue invoices instead of building their company, while 40% of owners avoid payment conversations entirely.
Smart founders protect themselves from day one.
- Choose reliable payment methods – credit cards fail 10-15% of the time, while bank-to-bank methods pull cash straight from accounts, on the day they’re due.
- Remove the stress with automation through e-invoicing and automated follow-ups.
- Establish clear terms upfront and, where possible, ask for 20-30% deposits.
- Reward early or prompt payment with small discounts that encourage faster payment and improve cash flow.”
David Holland, Managing Director of Talent Solutions at Employment Hero
“While most budget carefully for expenses like rent or stock, the true financial strain often comes from external hiring costs, missteps and the cycle of staff turnover.
Employment Hero’s 2025 Recruitment Report shows Australian businesses spend an average of $7,600 annually just on external recruitment costs, with larger employers spending over $20,000.. Hiring challenges compound when 41% of businesses report struggling with poor-quality applicants and 53% face rising staff turnover. For many, particularly SMBs, this results in repeated hiring cycles, diverting resources away from innovation and growth.
The broader economic climate adds to this pressure. Our report shows nearly half of leaders are concerned about their business surviving 2025, while 78% say uncertainty has made hiring harder. In fact, 64% of businesses report understaffing is pushing existing teams into overtime, inflating wage bills and increasing burnout risk.
For new business owners, this highlights the importance of planning for the full cost of hiring from the outset or better still, shifting to smarter, scalable and even free recruitment tools. We built SmartMatch and a suite of hiring solutions to arm SMBs with the right systems and technology to find talent faster and create a foundation for stable long-term growth.”
Paul North, General Manager for Asia Pacific, UserTesting
“One of the biggest hidden costs new businesses face isn’t marketing or operations, it’s the fallout from skipping pre-launch testing. Launching a business, product, or campaign without customer testing is like driving on the highway your first time behind the wheel. Testing may feel like it slows things down, but avoiding it often leads to costly iterations, wasted resources and higher customer churn. A Forrester TEI Report that we recently launched found that one organisation risked losing 50% of eligible customers before implementing user research – a revenue loss many startups wouldn’t survive.
So how do you prepare? The best performing brands today adopt rigorous research and testing into every phase to help them move faster with confidence. Early feedback reveals not just what works, but why – uncovering user motivations, pain points, and areas of delight. Build testing into your budget and timeline from outset avoids expensive surprises later. Centralise your research operations and choose tools that scale across teams. And finally, keep testing even after launch to make sure you’re continuously moving in the right direction.
In a world where businesses need to do more with less, testing isn’t a luxury, but your competitive advantage.”
Annette Densham, Awards writing specialist, Award Writing Services
“When you first launch, you budget for the big-ticket items, rent, stock, maybe a website and a bit of marketing. But business has a way of stinging you with some budget curveballs. Take taxes. We all know they exist, but most forget the ATO doesn’t just want income tax, it also collects BAS and PAYG. Then you have to factor in super, insurance and other costs to keep your business compliant. If you don’t plan for this, it piles up and a whopping big bill at the end of the FY. Have a tax account set aside for tax, otherwise you’ll find yourself in money strife.
Watch out for subscriptions. You sign up for a $20 app here, $15 tool there, a $10 AI program and suddenly your card statement looks like you’re feeding a family of five on UberEats. I’ve found using Google Pay helps me keep track of what I’m paying for. Each month, I ask ‘how has this benefited my business?’ If I’ve no ROI from the subscription, I cancel it.
Marketing can chew through cash fast especially if you have no strategy or plan and throw money at whatever the latest and greatest marketing tool is. I’ve seen people throw thousands at ads, pay-to-play articles or business awards without ever testing their message or if it’s going to get cut through with their prospective audience. Visibility is useless if nobody’s buying.
But the biggest hidden cost is one many overestimate or don’t acknowledge. You. Your time, energy, health and headspace. What dollar value do you place on what you do? Xero doesn’t have a line for burnout or the time you put into your business. There’s a cost and price in business, and you want to make sure you value your time with your pricing and where you spend it.”
Craig Stockdale, Managing Director, ANZ at Wasabi Technologies
“From payroll to marketing, business planning involves anticipating and juggling costs across many operational areas. Data storage, however, has evolved into one of the few expense categories where the pricing model works actively against predictable budgeting. While initial storage pricing may appear straightforward, the real complexity for new business owners lies in understanding what additional charges may apply as businesses scale.
So, how can business owners create more predictability around managing company data? Do research, or leverage the expertise of partners (e.g. managed service providers) to find which storage vendor has the best pricing while meeting the performance and security requirements needed for your business.
Most cloud storage models today include various fees beyond basic storage capacity – charges for data retrieval, API requests, and data transfer that can accumulate significantly over time, representing 40% of total cloud storage costs and creating budget unpredictability that affects long-term planning and operational efficiency.
What starts as a manageable monthly expense can quickly multiply as storage usage patterns mature. Successful business owners recognise this early, prioritising transparent pricing models where storage costs remain proportional to actual usage rather than sacrificing control over their own data. This is a fundamental shift that transforms storage from a growing liability into a predictable operational expense.”
Pam Macdonald, Director, Broadspring Consulting
“Starting a business is exciting and overwhelming all at once, especially when you have a team. One of the biggest hidden costs in a new business is the cost of not setting up employment contracts for your team from day one. Sure there is a cost to set up contracts well and many new businesses try to save money by not using professional advice – and perhaps because they trust their founding team. The problems and costs come when those verbal and handshake agreements are challenged by a dispute or a breakdown in an interpersonal relationship.We have all seen how messy things get when a trusted partnership goes pear shaped and this is often devastating for a small business.
Consider what happens when a founding employee asks for a significant pay increase which the founder feels they cannot pay. The employee will seek advice which will trigger a review of the contract terms and that may result in the initial request paling into insignificance when historic gaps are identified resulting in back payments and potentially penalties. When this type of thing happens, other employees will also start asking questions and suddenly the founder/owner is facing a barrage of queries, challenges and back payments.
In Australia there is a complex and dynamic industrial relations environment which means that businesses must invest in keeping up to date on changes to terms of employment and pay rates and benefits. Businesses who fail to keep up to date will pay a large cost not only financially, but in lost trust with their people and damage to the culture and reputation of the business.”
Greg Wilkes, CEO of Develop Coaching
“Starting a business is a thrilling journey, but new business owners often overlook several hidden costs that can impact their long-term success. One of the biggest challenges is underestimated startup expenses, including equipment, software, and initial marketing costs. These can quickly add up, draining the budget before the business even gets off the ground.
Here are key strategies to prepare:
- Create a Detailed Budget: List all startup costs: equipment, software, legal fees, insurance, and marketing. Add a 10-20% buffer for unexpected expenses to avoid surprises.
- Account for Administrative Time: Administrative tasks like bookkeeping, taxes, and legal documentation can be time-consuming. Set aside dedicated time or hire a part-time assistant or accountant to handle them early on.
- Plan for Cash Flow Gaps: Cash flow can be unpredictable. Build an emergency fund to cover 3-6 months of expenses, and establish clear payment terms with clients to avoid delays.
- Smart Marketing Budgeting: Marketing can easily spiral out of control. Start with small, cost-effective campaigns (e.g., social media ads) and scale as you track ROI to avoid wasted spending.
- Don’t Forget Operating Costs: Include recurring expenses like utilities, subscriptions, and office supplies in your budget to avoid surprises.
- Seek Advice: Connect with other entrepreneurs to learn about hidden costs they encountered and how they managed them.
By creating a solid budget and staying adaptable, you can navigate hidden startup costs and keep your business on track for success.”
Adam Henderson, Partner, Corporate and Commercial, Hicksons | Hunt & Hunt
“The first year can be especially challenging for many new businesses. Unexpected expenses can affect long‑term stability and growth. By planning for potential hidden costs, you’ll give your business a stronger foundation for success.
Beyond wages and costs of goods, there is a range of compliance, regulatory and operating business costs which can be underestimated, including:
- Compliance expenses: licenses, registrations and permits, workplace safety compliance
- Operational costs: in addition to lease costs, there will be expenses like electricity, business platform software and subscription, data protection measures
- Employment: including superannuation, leave entitlements, and unfair dismissal provisions
- Insurance: professional indemnity, public liability, and business insurance, D&O
When establishing a business, owners should budget for legal support, which includes choosing appropriate business structures, drafting and reviewing contracts such as customer and supplier agreements and leases, as well as protecting intellectual property through trademarks. Additionally, it is important to seek guidance from accountants and financial advisors to ensure compliance with tax requirements and to receive other essential financial advice.
Preparing for these initial start-up, regulatory and compliance matters will help set up a business for success. Getting things right from the outset involves time and cost, however it could be even more costly to get it wrong – which could lead to non-compliance penalties, legal disputes, or inadequate protection.”
Elise Balsillie, Head of Thryv Australia and New Zealand
“When I speak with new business owners, I often see the same blind spots. The obvious expenses – rent, stock and wages. These tend to be well mapped out. However, it is the hidden costs that can quietly eat away at momentum.
One of the most common is time. Every hour spent juggling admin, chasing invoices or wrestling with marketing, eats into the hours that could be spent winning customers. Time is a cost, and it compounds quickly if you don’t have systems in place.
Another is the price of inefficiency. Running multiple tools that don’t connect, relying on spreadsheets or ad hoc processes might feel manageable at first, but it drains both energy and cash flow. Overheads grow not because the business is booming, but because the way it’s being run creates friction.
Then there are the opportunity costs. Missing a lead because your business didn’t respond fast enough or failing to nurture a customer relationship, can be just as expensive as an unpaid invoice.
Preparation starts with visibility. Map not just where your money is going, but where your time and energy are being spent. Streamline early, invest in tools that talk to each other and protect your focus for growth.”
MJ Robotham, Director, APAC at NinjaOne
“There are a mountain of tools and applications organisations can use in today’s digital world, but this abundance can be overwhelming, and frankly costly.
Traditionally, businesses would invest in a wide range of different IT applications and tools, as they aimed to keep up with the pace of digital transformation and competitor innovation. However, this created tech sprawl, which has become redundant and complicated.
Comprehensive IT solutions, that integrate with other key tools, streamline processes, increase IT team’s productivity, and reduce the cost of ongoing maintenance, upgrades, and troubleshooting of your tech stack. This won’t just save costs in the short term but also makes it easier to adapt and scale your IT environment in the future as the business grows.”
Tracy Ford, Human Resources Consultant, Concept HR Services
“One of the biggest hidden costs for new business owners is not setting employees up for success. It’s not enough to give them a contract and a quick introduction and hope they’ll figure it out. When people lack what they need, performance drops, and employee turnover increases.
Why does this happen? Many owners are often stretched thin and are focused on keeping the business afloat. Some assume their team will work it out themselves. Others haven’t managed people before, so they don’t realise the level of structure required. Time pressures and the view that training is “too expensive” also contribute.
So how do you prepare? Start by making sure employees know exactly what’s expected of them. Be clear about priorities, standards, and goals. Give them the tools and support to do their jobs properly. Build feedback and recognition into daily work, not just annual reviews. Invest in training and growth opportunities to build confidence and competence. Most importantly, create a culture where people feel valued and motivated to contribute.
These steps improve morale and your bottom line. When employees feel supported and see a future in your business, they stay longer, perform better, and help the business grow.”
Peter Curran, Founder & Business Development Manager, Digital Surfer
“For a new business owner, what I find is they try a lot of different bits of marketing without a real plan or strategy, often inflating costs, and blowing out resources really fast with commonly little-to-no result. It can be really exciting to get in there and start posting on all the social platforms, putting up blogs, doing some newsletters, or even trying some ads. But in the beginning you’re often a one- or two-person band, and all of that can take a lot of time, and not pay off if it’s not done with a proper idea of goals, intention and best practices, leaving you feeling burnt out and stuck, and potentially paying for a bunch of platforms you’re not using.
What I recommend to new businesses is:
- Claim all your business profiles with Google and the social platforms so someone doesn’t take the names. You don’t have to use them all, but at least you have them if you ever want to.
- Start with a good website. It can help you get found by itself if it’s properly optimised, and will be the central point for all your promos, socials, ads, etc. so it’s important to tick off first.
- Set clear, realistic goals on what you want to achieve from your marketing. Don’t start too big to start and keep it simple. Choose one, maybe two social media platforms, to start on, a little SEO maintenance and one ad platform that really resonates with your business.
- Talk to a marketing company early, even if you think you can’t afford it in the beginning. Investing in your marketing is investing in kick starting and growing your business, and they can help guide you on where to start.”
Stuart Low, Founder and CEO of Biza.io
“Many new business owners underestimate the true cost of inefficiency. Beyond wages, marketing, rent and insurance, are the quieter drains: inefficient processes, slow supplier comparisons, and data vulnerabilities that quickly add up. The reputational risk of insecure data can also chip away at the bottomline.
It is critical for every business owner to have at least a basic understanding of Australia’s Consumer Data Right (CDR). The CDR isn’t just a compliance box to tick, it’s a framework that lets small businesses access and share data securely, streamline decision-making, and negotiate with confidence. When coupled with the prevalence of multiple copies of the same data, the CDR has the potential to reduce risk, improve efficiency and identify cost saving opportunities to enhance growth rather than spending time firefighting data quality challenges while trying to deliver for customers.
The businesses that will thrive are not necessarily the ones with the biggest budgets, but the ones that understand how to leverage tools like the CDR early to protect their margins and optimise their decision making through smarter ways of working.”
Imran Mir, Senior Commercial Lawyer, Owen Hodge Lawyers
“If your new venture involves leasing a shopfront, office, or factory, you will almost certainly be asked to sign a commercial lease.
While rent is the most obvious expense, the lease often carries additional obligations that can significantly impact your bottom line if overlooked.
One of the most underestimated costs is outgoings – the operating expenses of the property that the tenant must cover. These can include council rates and water rates, strata levies and building insurance, and common area maintenance, cleaning, and repairs.
Before you sign, it’s critical to understand which outgoings you are responsible for and to obtain an estimate of their annual cost.
Another hidden cost arises at the end of the lease through the make good clause. This provision requires tenants to return the premises to its “original condition.” In practice, this could mean removing your fit-out (counters, shelving, partitions), repainting walls or replacing flooring and undertaking repairs beyond normal wear and tear. Because “original condition” is often open to interpretation, disputes are common.
To avoid surprises, have a commercial property lawyer review the lease before you sign. They can highlight hidden costs and help you negotiate fairer terms.”
Steven Nicholson, Outsourced CFO, GearChange Business Advisory
“Starting a new business is daunting, so many things to organise and do. It’s tempting to rush to open the doors before you have the right planning and foundations in place. These financial foundations will help you prepare for the unknown:
- Costs budget for your first 12 months – tweak as you learn
- Revenue modelling that can flex for best, worst and even worse
- Cash flow forecast incorporating the above – rolling monthly or weekly
- Cash buffers – enough cash to cover your first six months trading expenses assuming minimal sales revenue
Also, don’t underestimate these hidden costs:
- Company set-up costs – thankfully there are online providers that can keep this cost low on top of ASIC fees. Using a lawyer will be expensive.
- Domain/name registrations – make sure your chosen business name can be registered, and domains are available. You may need to buy more than one variation to prevent copycats. Do this before you waste money on marketing design costs in case you have to change.
- Insurance – don’t skip this. Professional indemnity, public liability and cyber are likely to be minimum requirements.
Running out of cash before sales gain traction is the key challenge to prepare for and avoid. Best of luck!”
Kylie Bishop, Founder & Chief Executive, LBWco
“New business owners are in a unique situation – they can “see” the vision and hopefully have a plan to exploit a gap in the market with their product or service, but the full costs of bringing the business to life, have not yet been felt.
In my experience as a founder of four businesses, and a coach to hundreds of business owners, the hidden cost most underestimated is the cost of the owners’ time over the first 12 months. Time is money, and both will be limited.
Increase success in the first year by having a budget that predicts revenue and expenses, a feasibility model that maps out the “what if” timing scenarios between revenue, costs, and cashflow to help inform how much capital you need to sustain you and the business, and set a value on your time to help you focus on the things that matter most.”
Dave Chauhan, Co-Founder & Principal Advisor, Purple Spark Advisory
“We all do the math. We budget for rent, software, and inventory, believing we’ve covered our bases. But the most devastating cost new business owners face never appears on a spreadsheet. It’s not financial; it’s the crushing weight of emotional overhead.
You started this journey for a reason – for freedom, for purpose, for a deeply held “Why.” But soon, you’re not just the captain of the ship; you’re the entire crew. You’re the head of sales, the late-night bookkeeper, and the one taking out the trash. The personal toll is immense. It’s no surprise that a landmark study by UCSF researcher Michael Freeman found that entrepreneurs are more likely to experience depression (30%) and substance use (12%) than comparison participants.
So, how do you prepare for this hidden tax? You budget for your own sanity. You must invest aggressively in two things from day one:
- automation for the tasks that drain you
- delegation for the tasks you shouldn’t be doing.
And most importantly, you build a support network of mentors, peers, a coach – before you think you need one. The most valuable asset in your new business isn’t the product or the service. It’s you.”
Reeva Cutting, Business Owner at Cutting Edge Digital
“One of the costs I believe new business owners often underestimate is good accounting and bookkeeping software and assistance. Many new business owners do their own accounts and bookkeeping in the early days, using a manual spreadsheet when incoming and outgoing funds are not too frequent. Often people think that bookkeeping and accounting seems simple enough to manage themselves. But poor record keeping and infrequent reconciliation can create an accounting monster that could potentially cost even more to unravel. Having a great bookkeeper from day one can really take the pressure off having to wear too many hats, even if there is an expense associated with it. I would always recommend finding a great local bookkeeper (ask around for personal recommendations) to have on board in the early days. They can help you set up systems and processes for managing your business funds efficiently, which will only pay dividends as your business grows in the months and years to come.”
Ankit Jain, CEO and Founder, Econnex
“Keeping the lights on” is such a commonly used phrase in business that the literal meaning of it has become something many business owners take for granted. The rising cost of electricity is hitting households hard, but the impact and financial pressure on business owners has been extraordinary. Many small business owners are literally struggling to keep the lights on due to complex bills and contracts, rising electricity rates, and confusing sales messages from suppliers.
One of the most overlooked ways to keep electricity and other daily bills down is to compare. It sounds simple, but most business owners do not regularly compare electricity providers, missing out on potential savings of thousands of dollars every month. Service providers are fully aware of this inertia, and many are taking advantage of it. We should be normalising regular comparisons and switching of service providers – this upward pressure will help to hold them accountable and keep costs reasonable, while also ensuring we have a thriving SMB sector not being held back by basic running costs.”
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