How Much Money Does It Take To Start a Business?

Updated June 30, 2023

Startup businesses typically require an initial investment to get started. If you're thinking of starting a business, knowing how much money you may need up front can help you develop a business plan, attract investors and use your resources effectively. Exact business costs can vary depending on factors like geographic location, company type and resource availability. 

In this article, we discuss what types of costs to consider when starting a business, show how to calculate how much money it takes to start a business and offer tips for using your startup funds successfully.

Key takeaways:

  • Startup businesses typically include a variety of costs, such as one-time fees, fixed and variable expenses and optional costs.

  • Setting goals and creating a business plan can help individuals calculate startup costs and create a realistic budget. 

  • There are a variety of factors to consider when calculating startup costs, including office space, inventory and payroll, marketing, taxes and insurance.

Types of startup costs

Three people seated at a table with a laptop for a discussion.

There are many types of costs that factor in to starting a business. Understanding all these costs can help you determine how to allocate your startup money. Here's a closer look at common costs involved in starting a company:

One-time costs

One-time costs are elements of the business that you only pay for once. Typically, these occur at the beginning of the startup process. One-time costs might apply to things like:

  • Startup fees: Startup fees are the costs the come with starting a company, like paying to have the business incorporated. These fees can vary based on the type of business you're starting and your location.

  • Equipment purchases: New business owners may buy large or expensive equipment to get started.

  • Supplies and furnishings: While you may repurchase these items later, most businesses that occupy a physical space might make an initial investment for office furniture, technology and supplies.

Fixed expenses

When starting a new business, it's also important to consider fixed expenses, or repeat expenses that don't change. When calculating startup costs, determining monthly fixed expenses is important because you might not start making money from the business right away. Having money to cover expenses until you become profitable is an important step of starting a business.

Examples of fixed expenses include:

  • Rent

  • Utilities

  • Insurance

  • Loan payments

  • Payroll

Related: Fixed Cost: Definition, Importance and How To Calculate It

Variable expenses

Variable expenses are expenses that change each month. Like fixed costs, having money to cover variable costs when you first start out is important to ensure the company remains operational while you wait to become profitable. Examples of variable expenses include:

  • Credit card fees

  • Raw materials

  • Commissions

  • Delivery fees

Related: Fixed vs. Variable Costs: Definitions and Examples

Optional costs

When starting a new business, certain choices are optional. If you're trying to save money, you can choose not to pursue certain optional costs until you have the capital to cover them. For example, hosting a launch party, decorating your space or purchasing equipment you don't need right away represent optional costs. While these costs can help promote the business or image, they might not be feasible if you don't have the initial cash to make the purchases.

Related: 20 Factors To Consider Before Starting a Business

How to calculate startup costs

Starting a successful business requires a great deal of preparation. To have your startup business be profitable in the first one to two years, it's important to set a goal, create a production schedule, estimate a budget and determine startup costs. If business owners have an accurate estimate of their startup costs before they begin a new venture, they increase the success and longevity of their business.

Most successful business owners would suggest stockpiling at least six months' worth of operating funds before opening for business. This gives you a financial safety net you can fall back on if the business is initially slower than you expected. To calculate how much that is, follow these steps:

1. Create a goal for the business

Before you start spending any money on a business idea, set a specific goal for what you want the business to accomplish. Set objectives for profits, growth and other forms of success. After setting goals, consider your personal and professional priorities. Decide how much energy and time you expect the project to take make sure you're able to commit to the idea. Once you have these elements in order, you can prepare a realistic and manageable startup budget.

2. Develop a business plan

After you understand your goals for the business, create a plan for how to reach them. Set aside time to write a thorough business plan. This business plan can help you organize your thoughts about the business, show investors and lenders your intentions and collect the information to create a startup budget. A good business plan includes:

  • Your business purpose and goal

  • An overview of current supply and demand

  • An outline of how you plan to manage the business

  • A list of necessary supplies and vendors

  • Estimated weekly, monthly and yearly operating budgets

  • An explanation of how you plan to become profitable

Related: How To Create a Business Plan for a Small Business (With Example)

3. Look into financing options

Many business owners don't have the capital they require to start a business on their own. Most use outside financing when starting a business. This could include taking out a small business loan, getting an investor, borrowing from a family member or friend or applying for government grants.

Most lenders want to see a detailed business plan and cost estimate before agreeing to finance your business, so have the documents prepared in advance. You can use your loan amount or investor funds to help you create a budget that works with your available startup cash.

4. Establish a budget

With your goals, business plan and financing in mind, create a business budget. Consider the costs of starting a company and allocate different portions of your budget to fulfilling these needs. Be sure to consider common costs like:


Most businesses require some sort of specialized equipment. For a marketing agency, this would include printers, monitors and electronic tablets. Meanwhile, a dentist's office would require examination chairs, lights, drills and an X-ray machine. Typically, this type of purchase is a one-time expense that only has to be repeated if the equipment breaks or becomes outdated.

Depending on the business you're starting, you may minimize your startup costs by buying secondhand or wholesale equipment. The costs of equipment vary by business and can be anywhere from a few hundred dollars to $100,000.

Permits or licenses

Most businesses require some sort of permit or license from the federal government before they can open their doors. Owners can also expect to pay a fee to register the business' legal name and trademark. If you wish to register as an LLC, you can expect accompanying incorporation costs and to file the articles necessary for your state. Estimates for federal costs vary by state, but rarely exceed $300.

Office space

Many businesses begin with the business owner working from within their own or in a shared office space. As the business grows and more employees become necessary, though, the business owner may decide to rent or buy their own office space. Property costs can vary significantly depending on location and the business' specific requirements. Small business owners typically budget between $100 and $1,000 per employee per month.

Office supplies

One of your potentially expensive business expenses is office supplies. This includes ink for the printer, computers for your employees and coffee for the staff room. Some office supplies like chairs, a microwave or a WiFi router you may only buy once. Others like copy paper, disposable tools and cleaning supplies typically get replaced as they run out. The cost of your supplies can vary by industry but may be able to stay within 10% of your overall budget.


If you have employees, you can expect payroll expenses, too. This includes benefits, like insurance and vacation days. As the business grows, you may choose to hire more employees, so your payroll budget may change.

Consult competitive job listings and use resources like Indeed Salaries to determine how much to budget for each employee's paycheck. For example, if you're planning on hiring an administrative assistant, Indeed data shows that they earn an average of $49,688 per year. The specific amount can vary depending on your employee's skill level and your geographic location.

For the most up-to-date salary information from Indeed, click on the link provided.


If the business supplies a product, make room in your budget for purchasing inventory. This includes all the resources and materials you require to manufacture, package and ship your product. Research the current market and your competitors to determine how much inventory to have available. The cost of your inventory depends on your product but usually accounts for 17-25% of your budget.


Marketing is one of the most effective ways to bring in customers and increase your profits. Marketing can take many forms, including flyers, commercials and internet advertisements. Some of these tactics can be expensive, so start out by using free options like social media platforms to spread the word about your new business.

A regular posting schedule, creative content and meaningful interactions with your followers can help you grow your online audience effectively.

Related: 21 Tips for Starting a Successful Business


A well-crafted website is one of the most important assets for a business owner. Many of your customers and clients are likely to search for the business online before they commit to buying your product or service. There are many services available that you can use to create a free website.

Most quality website hosting services also offer a premium plan that requires a monthly or yearly payment. While this cost varies based on the hosting service you choose, popular providers typically average around $40 a month for premium service.


Depending on the business you start, you may decide to purchase a business insurance policy. This may involve liability insurance, property insurance and workers' compensation. While the cost of insurance can vary based on the type of business you operate, some companies invest about $1,200 per year.


Every business must pay income tax to the federal government. It is challenging to predict the exact amount when you don't yet have an accurate estimate of your yearly revenue, so you may want to invest in hiring a certified public accountant (CPA) to help you file your taxes. This added expense may be well worth the money if the CPA can save you money when filing.


In addition to a CPA, you may also want to invest in hiring experts to support you as you build the business. Possibilities include marketing consultants, information technology technicians and attorneys. Typically, you can pay these types of experts an hourly rate to meet with you and discuss the specific needs of the business.

These experts are often able to offer valuable insight into your processes that can help save you money in the future. Some established companies pay between $1,000 and $5,000 per year for professional consultation.

Related: Learn About Being a Business Consultant

Tips for starting a business

Here are some additional tips to help you save money when you first start a business:

Be adaptable

Business ventures seldom go exactly according to plan. You may encounter some unexpected costs within the first year or two of starting your new business. Equipment failure, employee termination and manufacturing delays are all examples of unexpected costs you might experience. If you have a healthy savings account and are willing to adjust your budget to accommodate setbacks, it can be easier to overcome challenges without taking a significant personal loss.

Decide what's important

When starting a new company, your budget might not match your vision. It's often more important to have reserve money, though, than to have the best equipment. As the business grows, you can invest in higher-quality purchases.

Keep to your budget

Budgets exist for a reason. Following your budget can help you stay on track. If you spend more than you expected in one area, consider reducing your budget in another to accommodate the extra spend.

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