13 Business Startup Costs and How to Calculate Them

Here’s a simple step-by-step breakdown of what you need to take care of while handling startup budgeting. Based on the business size and type, you’ll need to budget carefully for salaries and include payroll taxes, benefits, all types of pto, and other direct costs. If you have startup equity, consider getting a separate tool for that too.

• It’s helpful to categorize expenses into key areas so you don’t miss anything.
• Small business owners use a cost sheet to make up part of the business plan and attain financing.
• For example, if your estimated costs total $50,000, you should plan for $55,000–$60,000 to stay financially safe.
• The U.S. Small Business Administration (SBA) provides free guidance and sample worksheets you can use for both.
• At the same time, plan for growth by identifying new markets, expanding your offerings, or improving infrastructure.

The materials and a Shopify account are all you need to get started. The numbers below are from our interview with Jazmin who started the company in 2020 and is making more than $150K per year. You might be able to start a food truck for as low as $10K, but I’d expect to spend more like $20K to get started.

“These are costs that can arise unexpectedly but are critical to account for when preparing a budget,” Madison says. Startup costs are the expenses a new business faces during its creation. You can start a photography business for as little as $500, which includes the price of the camera, a website, online photo gallery, and Adobe Photography Suite. Expect to spend at least $80 getting started, but if you are sourcing materials and manufacturing, it could be more than $30,000 to business startup costs make your products.

Variable Costs

MoneyGeek’s analysis shows monthly premiums range from $13 for workers’ compensation to $72 for professional liability coverage. While every type of business has its own financing needs, experts have some tips to help you figure out how much cash you’ll require. Drew Gerber, CEO of the PR firm Wasabi Publicity, estimates that an entrepreneur will need six months’ worth of fixed costs on hand at startup. If you don’t know where to start, there are several types of businesses to consider. Most likely, you’ll need to dropship the product directly to the customer’s address by sourcing it from a supplier like Alibaba.

Insurance is another important cost you should budget for as a new business owner. Depending on the type of business you operate, some types of business insurance coverage may be more important than others. Estimating startup costs isn’t just about the launch—it sets the tone for how you manage your business.

Services

The cost of office space starts around $300 per month (per employee). Yet in high-cost areas like San Francisco or New York, your monthly office space cost could be over $1,230 per person. Below is a list of some common organizational, start-up/pre-opening costs and how they should be treated for book vs. tax purposes. In addition, the start up costs calculator will produce an opening balance sheet based on the information entered for use in the Financial Projections Template. While no plan is foolproof, this checklist for starting a business can give your startup experience more structure and organization. If you’re feeling overwhelmed throughout the process, we recommend you return to your checklist for inspiration.

Figure out your financing methods.

These are the expenses incurred only once during the startup phase. Examples include legal fees for business registration, logo design, and the purchase of essential equipment. In any case, all of this will add up to the overall startup costs and the funding you’ll need to get the company going. Customarily, you may need an estimated $1,500 – $3,000 USD per month to rent office space for a team of under ten people.

Knowing how much cash your business expects to generate and use is important to measure success. If you don’t know if you’re turning a profit, how can you expect to stay in business long term? Developing an operating budget might sound a bit like corporate speak, but it doesn’t have to be complicated. For example, I run a freelance writing and journalism business in my spare time.

Step 1: Identify your essential expenses

He was the Managing Director and Global Head of M&A at VantagePoint Capital Partners, a venture capital fund in the San Francisco area. His focus is on internet, digital media, AI and technology companies. His articles have appeared online in Forbes, Fortune, TIME, MSN, Yahoo, Fox Business and AllBusiness.com. Richard is the author of several books on startups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business.

• It depends on manufacturers, how big your business is going to be, and whether you have any investors.
• If the business needs specialized equipment, it’ll probably cost more than easily accessible items.
• The table below shows the breakdown of the business expenses a small business owner should expect when starting a landscaping business.
• Rent, utilities, insurance, and salaries fall under operational costs.

It’s become a growing global trend after the 2019 pandemic outburst. Nonetheless, some companies continue renting office space, which goes down to individual business needs and employee locations. The taxes are variable startup costs that differ by region, business type, and business structure—sole proprietors pay according to their tax bracket and corporations are taxed at 21%. Taxes are a hidden cost for many small business owners because they don’t always know the tax laws in their area nor the taxes applicable to their type of business.

How We Determined Startup Business Insurance Costs

Business start up costs are the expenses you incur when launching a new company. These include legal fees, equipment, branding, marketing, premises, and more. Understanding and budgeting for them is essential for a stable and successful launch. Similar to ongoing expenses, fixed costs are paid regardless of how much you sell. In other words, these costs do not change and should not affect your cash flow.

Let’s say you plan to sell $75,000 in inventory over the next year. If you wanted to keep 10% of that number available to sell to customers, you’d need to purchase $7,500 in inventory. The National Business Association has authored and curated resources on various topics and in multiple formats that will help you achieve your goals. Whether you are considering starting your first business or if you are a seasoned entrepreneur, there is something in this Resource section of the NBA website that will be helpful.

He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.