Most runway models capture the obvious costs: salaries, rent, software. But it's the forgotten costs—the ones that don't fit neatly into categories—that blow up projections. Here's a comprehensive list of what founders typically miss.
Legal and Compliance
Legal costs are chronically underestimated:
| Cost | Typical Range | When It Hits |
|---|---|---|
| Incorporation and setup | $2-5K | Day 0 |
| Fundraising legal (per round) | $15-40K | Each fundraise |
| Employment contracts/handbook | $5-15K | First hires |
| Customer contract templates | $5-20K | First enterprise deals |
| IP/trademark registration | $3-10K | Year 1 |
| Ongoing legal counsel | $2-5K/quarter | Ongoing |
Budget: $30-50K in year one, $15-25K ongoing annually.
Insurance
As you grow, insurance becomes non-negotiable:
- D&O Insurance: $5-15K/year (required by most investors)
- E&O/Professional Liability: $3-10K/year
- Cyber Insurance: $2-8K/year (increasingly required by enterprise customers)
- Workers' Comp: Varies by state, typically 1-3% of payroll
- General Liability: $1-3K/year
Budget: $15-35K annually once you have employees and customers.
Accounting and Finance
- Bookkeeping: $500-2K/month (or hire a part-time controller)
- Annual tax prep: $3-10K
- 409A Valuation: $3-8K (required before issuing options)
- Audit (if required): $20-50K annually
- Cap table management: $1-5K/year (Carta, Pulley, etc.)
Budget: $15-30K annually for early-stage.
People Costs Beyond Salary
A $100K salary doesn't cost $100K:
True Cost of a $100K Employee
Base salary: $100,000
Payroll taxes (employer portion): $7,650
Health insurance: $8,000-15,000
401k match (if offered): $3,000-4,000
Equipment/setup: $2,000-4,000 one-time
Software licenses: $2,000-5,000/year
Recruiting cost (amortized): $5,000-10,000
Total first-year cost: $130,000-145,000
Use 1.25-1.4x base salary as your "fully loaded" cost.
Infrastructure Surprises
Infrastructure costs rarely go down:
- Cloud costs scaling: Often 2-3x faster than expected with growth
- Security tools: $5-20K/year as you mature
- Monitoring/observability: $3-15K/year
- Backup/disaster recovery: $2-8K/year
- Development environments: Often forgotten—staging, QA, etc.
Customer Acquisition Hidden Costs
Marketing budget isn't the whole story:
- Conference booths: $5-20K per event
- Travel for sales: $500-2K per trip
- Sales tools: CRM, outreach, etc. = $500-2K/rep/month
- Content creation: Design, video, copywriting
- POC/pilot costs: Engineering time for trials
The "One-Time" Costs That Recur
Some costs are framed as one-time but keep happening:
- Team offsites: $500-1,500/person, 1-2x/year
- Equipment refresh: Laptops every 3 years, monitors, etc.
- Office moves: More common than expected
- Rebranding: Website refreshes, new collateral
- Celebration/milestone events: Product launches, funding announcements
The Emergency Fund
Random things go wrong:
- Server goes down, need emergency support
- Key employee needs to travel for family emergency (you cover)
- Security incident requiring immediate response
- Customer escalation requiring executive attention
- Unexpected tax bill
Budget: 5-10% of monthly burn as emergency buffer.
Building Your Complete Model
Here's a checklist for a comprehensive burn model:
Monthly Fixed Costs
- Salaries and contractor payments
- Benefits and payroll taxes
- Rent/coworking
- Software subscriptions
- Insurance (monthly allocation)
- Bookkeeping/accounting
Monthly Variable Costs
- Cloud infrastructure
- Marketing spend
- Sales commissions
- Payment processing fees
- Customer support tools
Quarterly/Annual Reserves
- Legal fees
- Tax payments
- Insurance renewals
- 409A valuations
- Team events
- Equipment/refresh
Contingency
- 10-15% buffer on total monthly burn
- Higher for early-stage (more uncertainty)
The Rule of Thumb
If you're only counting obvious costs, add 15-25% to your burn estimate. This accounts for the hidden costs and variance that every startup faces.
Better to be surprised by having more runway than you expected than running out because you forgot about legal fees.