How Much Does It Cost To Start a Business? A Comprehensive Guide

Starting a business is like planting a seed. With the right resources and care, it can grow into something amazing. But just as a seed needs water and nutrients, a business needs money to get started.

So, how much does it cost to start a business? Here’s a guide to different kinds of startup costs and how much to save or raise to get your business up and running.

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Understanding the Different Types of Business Expenses

The first thing to understand is the main types of expenses you’ll encounter. Understanding these types helps you create an organized and accurate budget. In turn, you can make informed decisions when allocating your startup funds.

Expenses can fall into a few different categories:

One-Time Expenses Versus Ongoing Costs

One-time expenses are business costs you only have to pay once. These include business registration fees and many equipment purchases. These expenses are typically associated with getting your business up and running.

Ongoing costs, on the other hand, are expenses you have to pay on a regular basis. Some of the most common examples are rent, utilities, and employee salaries (if you aren’t working alone). These costs are necessary for operating smoothly.

Fixed Costs Versus Variable Costs

Fixed costs stay the same no matter how much product you produce or how many services you sell. Examples include insurance premiums and subscriptions. These costs are predictable and easier to budget for.

Variable costs change based on demand for your products or services. Raw materials, shipping fees, and employee bonuses are examples of variable costs. They fluctuate from month to month, making them harder to predict and incorporate into your budget.

Essential Costs Versus Optional Costs

Essential costs are expenses you need to run your business legally and effectively. They include permits, inventory, and payroll.

But optional costs aren’t critical to the functioning of the business. These might include upgrades to equipment, extra marketing efforts, and team-building activities. While they aren’t mandatory, they’re helpful additions to help your business thrive.

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10 Business Startup Costs To Consider

Let’s take a closer look at some of the specific costs to think about when planning your startup budget. You may not encounter all of these expenses, but they’re important to know, just in case.

1. Incorporation Fees

• Business registration
• Licenses and permits
• Trademark and patent applications

2. Online Presence and Marketing

• Website design and development
• Domain name and hosting fees
• Email marketing services
• Social media advertising
• Search engine optimization (SEO)
• Content creation (blog posts, videos, infographics)

3. Equipment and Technology

• Industry-specific machinery and tools
• Computers, printers, and software
• Phone systems and Internet services
• Point-of-sale (POS) systems

4. Inventory and Supplies

• Initial inventory stock
• Raw materials for production
• Packaging and shipping supplies
• Office supplies (paper, pens)

5. Payroll and Human Resources

• Employee salaries and wages
• Payroll taxes and processing fees
• Employee benefits (health insurance, retirement plans)
• Human resources software and services

6. Rent and Utilities

• Office or retail space lease
• Utilities (electricity, water, gas)
• Property insurance
• Maintenance and janitorial services

7. Professional Services and Consultants

• Legal services for business formation and contracts
• Accounting and bookkeeping services
• Marketing and branding consultants
• IT support and cybersecurity services

8. Insurance and Taxes

• General liability insurance
• Professional liability insurance
• Workers’ compensation insurance
• Income taxes and estimated quarterly tax payments
• Sales tax and other local taxes

9. Training and Development

• Employee onboarding and training programs
• Professional development courses and workshops
• Industry conferences and networking events

10. Contingency Funds

• Emergency expenses
• Unexpected repairs and replacements
• Cash reserves for slow periods or economic downturns

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What’s the Average Cost to Start a Business?

With common startup expenses covered, let’s dive into some real-world examples. Average startup costs for a business vary dramatically depending on the industry. According to 2020 research from LendingTree, the average amount of capital you need per industry is as follows:

• Accommodation and Food Services: $252,713
• Arts, Entertainment, and Recreation: $211,970
• Construction: $67,349
• Educational Services: $82,241
• Finance and Insurance: $140,628
• Manufacturing: $219,982
• Retail Trade: $179,585
• Transportation and Warehousing: $117,116
• Wholesale Trade: $176,944

Keep in mind that these numbers are just averages. Small service-based businesses can be a lot more affordable to get off the ground. 

For example, starting a landscaping business typically costs between $5,000 and $15,000, depending on the equipment needed. And you can launch a power washing business with as little as $2,500 to $5,000 for a good pressure washer and accessories. You can potentially start a general cleaning business for even less.

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How To Calculate StartUp Costs for a Business

Calculating startup costs is a key part of planning your new business. You can’t begin if you don’t have the funds in place. Take the time to list and add up all the essential costs you expect in the first few months of operation. Be as thorough as possible so you don’t miss anything important.

Once you have your list, research typical costs for each item. Look online, get quotes from providers, or ask other business owners in your field for ballpark estimates.

For example, let’s say you’re starting a small construction business. Your essential startup costs might look something like this:

• Tools and equipment: $20,000
• Work vehicle: $30,000
• Materials and supplies: $5,000
• Business licenses and permits: $1,000
• Insurance: $2,000
• Marketing and advertising: $2,000
• Employee salary for the first three months: $10,000

Adding these up, your total startup costs would be about $70,000.

Keep in mind that this is just an example. The true cost to open a business depends on factors like your location, business model, and the specific equipment and supplies you need.

7 Tips To Save on Startup Costs

Starting a business is exciting, but it’s also a challenge. And managing finances is no exception. Here are some practical tips to help you keep your startup costs under control:

1. Create a Detailed Business Plan

Develop a comprehensive business plan. Outline your goals, target market, and financial projections. This plan is your guide for budgeting and making decisions. A clear plan helps you allocate your resources efficiently and avoid unnecessary expenses.

2. Separate Your Personal and Business Finances

Open a dedicated business bank account and get a business credit card. This maintains accurate records and simplifies accounting. It will also make it easier to track expenses and avoid mixing personal and business funds.

3. Prioritize Essential Expenses

Focus on costs that are necessary for your business to operate and make money. These essential expenses should always come before optional ones. While it’s tempting to spend money on extras, try your best to delay or cut down until your business is more established and has a steady cash flow. Prioritizing your spending stretches your startup capital further.

4. Consider Leasing Instead of Buying

Think about leasing equipment or office space instead of buying outright. This reduces upfront costs, which is helpful for businesses with limited capital or changing needs. Leasing also gives you more flexibility to upgrade or switch out equipment as you grow. If you really want to save money, start your business from a space in your home.

5. Outsource Tasks When Appropriate

Outsourcing certain tasks can be more cost-effective than hiring full-time staff. Consider outsourcing bookkeeping, marketing, or IT support to experts in those fields. This gives you time to focus on your core business while still getting the expertise you need to grow.

6. Review and Adjust Your Budget Regularly

Your business budget should be a living document that you review and adjust often. Monitor your expenses and revenue monthly or quarterly, and look for areas where you may be overspending or underperforming. Staying on top of your finances leads to more informed decisions and fewer pitfalls.

7. Plan for Contingencies

No matter how well you plan, unexpected expenses and emergencies can arise. Set aside a portion of your startup funds as a contingency budget. This gives you something to fall back on as you weather financial challenges—without derailing your business. Aim to have enough savings to cover at least three to six months of operating expenses.

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Automate Bookkeeping by Syncing Your Joist and Quickbooks Online Accounts

Once you’ve got your business up and running, you need an easy way to stay on top of your finances. That’s where Joist comes in.

Manage, organize, and automate your bookkeeping with Jost’s QuickBooks Online sync. Spend less time keeping records and more time delighting customers. Start your business strong and keep your books organized.