Small Business Start-up Series – What Does It Cost to Start a Business?

Looking to figure out how much it’s going to cost to start your new business?

Start-up costs can add up quickly, but if you plan for them, you can launch with confidence and avoid running out of money before you make any.

Some businesses are more cash intensive than others so analyzing the start-up costs at the beginning of your project can help you ensure that you’re starting a business that is attainable for you to get off the ground.

This article discusses a variety of expenses and fees you can estimate and be aware of when launching and what to expect down the road.

Here is a cash flow template from Choose Your Metric that you can use to model out these expenses while you read this article to help you get an idea of your start-up costs in about 30 minutes. Let’s get started!

Cost of Producing your Product or Service

If what you’re planning to sell has a materials or initial inventory cost per item, you’ll want to figure this out. For example, if you’re planning to sell clothes, how much will it cost you to produce each item? If you’re planning to sell food, how much will the ingredients cost? If you’re planning to start a lawn service, how much will the first lawn mower cost?

Figuring out these costs can be done with a little research.

One-time Start-up Construction

If your business has a brick-and-mortar aspect, you’ll likely have some up-front construction costs. There can be many hidden fees in construction that you may not realize when you get started.

These come in all shapes and sizes and include everything from expediting fees with the Department of Buildings to attorneys’ fees for dealing with unexpected things like air quality to engineering and architect fees that could expand depending on what’s found when the digging starts.

You want to work with a real estate broker who understands your type of business so they can steer you in the right direction for spaces that already have a lot of what you need.

For example, if you need gas, look for a building that already has gas; if you need three-phase electric power, look for a building that already has three-phase electric power. Having all the guts can save you a lot of money in construction, especially if you’re looking to build a commercial kitchen for cooking or some other specialty space.

Industry Related Fees and Expenses

There can be many hidden fees in certain industries that you’ll want to research ahead of time. For example, if you’re planning to purchase parts or materials from overseas, while their price per item is quite low, the freight and duties to ship it to your home country can be as much if not more than the cost of the actual item.

This is where scale will become important for a business like this.

If you’re looking to open a business involving caring for children or serving food, you’ll be required to follow Department of Health guidelines, attain permits and certifications, and so on. Other industries have their own required certifications, so look these up and be prepared to acquire them.


Every small business needs at least a business liability policy. At the very beginning when you don’t have much revenue, this policy will be less than $500 per year. You may also want to get cybersecurity insurance at the beginning as well, which will be about another $500 per year.

Other insurance that will come into play down the road when you hire employees includes workers’ compensationdisability insurance, and employee risk insurance. At some point there is also health insurance, which can be quite expensive if you’re insuring fewer than 10 people.

Some permits from the Department of Health require workers’ compensation certificates even if you don’t have employees.

Find out all the requirements for your permits and certifications.


If you’re renting a commercial space, some landlords ask for as much as six months’ worth of rent in advance. You’ll also be required to provide deposits to utilities companies. If you’re required to leave high deposits, you can try to negotiate that after the first or second year, one month be released each year until there are only two months’ deposits being held by the landlord.


There are some up-front marketing costs you’ll want to budget for. If you want to go super inexpensive out of the gate, you can do some things yourself until you start making revenue and are able to invest in professional services. Here are a few items to consider.

Branding and Logo Design

You can either come up with a name and logo on your own for free or hire a firm for anywhere from $50 online to $1,000 at a reasonably priced agency. You don’t technically need a logo to start. Simply choose a font you feel represents the company’s vibe and use it to write the name.

Once you start making money and get a few clients, you may want a professionally designed logo or what you’re using may be fine depending on your goals.

New Website Development

In today’s digital world, you should have some online presence. If you’re not ready to put a website, you can create either an Instagram or Facebook page that can function as your homepage until you’re ready for a website. You can also put together a simple homepage on your own with Squarespace.

If you want to invest in a simple website, you can create a few pages in PowerPoint and hire a web designer on Fiverr for a few hundred bucks.

Once you’re ready to hire a professional designer and copywriter to help you with a professional website, you can plan to spend between $5,000 and $10,000.

Advertising and Promotion

What everyone needs when they start a business is a paying client.

If you can earn your initial clients from referrals and warm leads; you may be able to get sales by pounding the pavement and making phone calls. This will not cost you anything.

If your business does require ginning up business through meeting cold leads; you may need to create a promotional plan that involves an event, flyers, or advertising in places where your target market hangs out. Make the plan first and then figure out how much to budget to execute.

General Business Administration

When you first start up, there are a bunch of free apps that you can begin using to keep yourself organized. Asana, Mailchimp, Zoom, Process Street, and others have limited access for you to get started. Once you hit a certain threshold, you’ll need to start paying, anywhere from $10 to $50 per month. If you pay by the year, they give you two months for free.

Make a list of apps and figure out how much to budget for the first year.

Other administrative costs that you’ll incur include bookkeeping and tax preparation, business organizational fees, intellectual property protection fees, general consulting and advisement fees, training and development courses (like Peer to Peer), merchant fees, banking fees, and other ancillary costs.

You can use the above small business start-up costs template to map out all of these anticipated costs so you aren’t caught off guard.

Unanticipated Costs

No matter how well you plan, there will always be something you didn’t think of. It is a best practice to add on 10 percent of your estimated start-up costs for unanticipated costs to your business. If you’ve done a great job planning, you will not need more than 10 percent and hopefully there are no crises that cause you to need more.

Understanding the financial side of your business is essential to starting off on the right foot to building a successful business. Understanding the one-time versus recurring costs of starting a business will help you make good business decisions in other areas; such as pricing and who you want to focus on as your target client.

Build good financial habits from the beginning and you’ll build a sustainable business.

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