In the startup world, where every dollar counts, spending too many dollars on expenses you weren’t prepared for can quickly put a company in a tough spot. In a 2011 survey, one in three small business owners reported that underestimating monthly expenses was their biggest mistake.
Trying to estimate those costs, though, can be even trickier in an industry as complex and regulated as medicine. In a recent discussion in the Medical Devices LinkedIn group, Michelle Bonn, a business owner in the medical manufacturing and U.S. Food and Drug Administration compliance field, asked members of the Entrepreneur subgroup to identify some of their most challenging or surprising business expenses.
One senior executive in the medical device industry suggested that, as a general rule, most projects will cost three times as much as entrepreneurs originally think and take three times as long as planned to commercialize. Here were some of the most commonly mentioned underestimated costs:
- Regulatory approvals including the cost of consultants for all markets.
- Marketing including collateral design and creation, sample products for sales representatives to take with them and trade show attendance and fees. Entrepreneurs in general often make the mistake of assuming their product will sell itself because it meets a market need, the group members said.
- Nonclinical testing including safety, electrical, software and proof-of-concept testing, if applicable.
- Clinical trials
- Downtime and delays. “I’ve been surprised by how many startups really believed (or at least gave that impression) that the schedule would be accurate,” wrote regulatory and quality consultant John Speer. “Yet, nearly every one of these ventures has been off by months, leading to increased business expenses that were not anticipated.”
Other expenses worth mentioning:
- Product storage fees
- Packaging and labeling
- Product redesign/retooling
- Setting up a quality management system
- Legal fees
- Traveling and entertainment expenses for meetings with clients, vendors and investors (via small business coach Vicki Donlan’s blog). One medical device founder recommended that entrepreneurs ask themselves how their first customer will hear about the product and what it will take to convince him/her to buy it. Then consider that same question for the first 10 and 100 customers.
What are some of the most surprising hidden costs you’ve encountered as a startup founder?
Reserve your seat now for MedCity CONVERGE, to be held July 9-10 in Philadelphia. Discover strategies, solutions and startups in healthcare innovation. Be a part of this gathering where the entire healthcare ecosystem converges.