Starting a business can be an exciting endeavor, but it’s also notably not cheap. If you’re dreaming of launching a cozy café, an online store, or a cutting-edge tech startup, you’ll need to budget for a wide range of expenses. Beyond rent for space or equipment costs, there are also hidden expenses such as permits, marketing, and taxes.

So, how much does it actually cost to start a business? Here’s a look at what you can expect, including an overview of the major expenses and how to estimate the capital you’ll need.

What’s in this article?

• What are the main costs of starting a business?
  
• How does the type of business impact startup costs?
  
• How do you estimate your startup budget?
  
• What are the overlooked costs of starting a business?
  

What are the main costs of starting a business?

Launching your own business includes several core expenses. Here’s an outline of the costs you’ll likely incur.

Legal and regulatory costs

These are unavoidable, and skipping them can cost you more down the road. Depending on your business structure (e.g., LLC, corporation, sole proprietorship), you’ll need to budget for:

• Business registration fees: These vary by location, but expect to pay anywhere from $40 to over $500.

• Licenses and permits: These are industry and location-specific. For example, a restaurant will need health department permits to operate, while an online shop might require a general business license.

• Trademarking or intellectual property: If you’re building a brand, securing your logo or slogan could cost several hundred to thousands of dollars.

Some might try to handle this process on their own, but consulting an attorney—especially if you have a unique product or service—is worth the expense.

Equipment

If your business relies on a physical location, such as a café or salon, you might need to budget for major up-front investments such as furniture, machinery, decor, and other elements. Digital businesses might need software, subscriptions (e.g., accounting software or project management platforms), and a reliable computer setup. Even smaller ticket items, such as office supplies, can get expensive. The more customized or industry-specific your needs are, the higher the price tag.

Marketing and branding

To stand out, you might want to invest in marketing and branding services. These can include:

• Website development: A business website designed by a professional can easily run from $2,000–$10,000. If you build your own site with platforms such as Squarespace, you’ll still need to pay for a domain name and hosting.

• Brand design: Expect to spend anywhere from $500–$5,000 on developing logos, branding guidelines, and packaging (if applicable)—depending on the designer or agency.

• Advertising: Whether it’s social media ads, Google ads, or printed flyers, marketing costs can add up quickly. A good starting point is to allocate 12%–20% of your projected revenue for ads.

Inventory or initial product development

If your business revolves around a product, this will be one of your biggest up-front costs. You’ll need to budget for prototype development, small-batch production, and initial stock. This can be especially costly if your suppliers require high minimum order quantities (MOQs).

Location costs

Location-related expenses are often among the biggest expenses for brick-and-mortar businesses. Most commercial leases require paying the first month’s rent plus a security deposit, which can total several months of rent up front. Build-outs and renovations—and even basic cosmetic changes such as painting or shelving—add extra costs.

Employee or contractor costs

Even if you’re not hiring full-time employees, you might still need contractors, freelancers, or consultants. In addition to the cost of the work, you might need to pay for human resources (HR) and benefits software such as Gusto or QuickBooks Payroll to manage payroll and other administrative work.

Ongoing operating costs

With a physical location, you’ll need to pay for utilities and internet. Many businesses opt to keep accountants, bookkeepers, and legal advisors on retainer. Businesses are also often required to pay monthly insurance premiums for general liability insurance, workers’ compensation, or industry-specific policies (e.g., product liability for consumer goods).

Contingency fund

No matter how much you plan, mishaps are a part of the process. A key piece of equipment might break, advertising costs could skyrocket, or a supplier might fall through. Setting aside at least 10%–20% of your budget as a buffer can help save you when problems arise.

How does the type of business impact startup costs?

Different industries and models come with unique requirements, so the type of business you’re starting has a huge impact on your startup costs. Here are the main factors that drive differences in startup costs.

Physical vs. digital business

Physical businesses typically have high up-front expenses. For example, opening a café or boutique can involve renting a space, renovating it, and outfitting it with furniture or equipment—which can cost tens of thousands of dollars. You’ll then add on utilities, insurance, and local compliance costs.

Online businesses can start lean. A solo entrepreneur selling digital products or running a service-based business might only need a website, a laptop, and some software. But ecommerce can come with additional costs, such as inventory storage or logistics.

Product-based vs. service-based businesses

For product-based businesses, inventory is a major early expense. If you’re manufacturing something, you’ll need to cover the costs of raw materials, production, and often high MOQs to get started. Even resellers or dropshippers are still subject to paying for bulk purchasing, packaging, and branding.

Service-based businesses are usually less expensive to launch because your expertise is the product. For example, a consultant or personal trainer might need only basic marketing materials to attract clients. But if the service requires specialized equipment or personnel (e.g., a photography studio, a facialist, etc.), costs can escalate.

Franchises vs. independent businesses

Franchisees typically pay an up-front franchise fee—which can run from $10,000 to over $50,000—plus ongoing royalties. However, branding and supplier sourcing are often handled for them.

Independent businesses afford a business owner more creative freedom, but they require more investment in marketing, operations, product development, and beyond.

Industry regulations and compliance

Highly regulated industries almost always carry higher costs to launch a new business due to legal and compliance requirements. For example:

• Healthcare and wellness: Starting a private clinic, physical therapy practice, or a med spa means navigating licensing, permits, and often costly insurance policies.

• Food and beverage: A restaurant must comply with strict health department codes, which could involve investing in industrial-grade kitchen equipment, ventilation systems, and ongoing inspections.

• Finance or legal services: Businesses that provide financial or legal services are required to obtain specialized certifications, meet higher standards of compliance, and often pay higher insurance premiums.

Plans for growth

Your vision for growth in the future will also inform your initial costs to launch. For example:

• If you’re launching a tech platform, a substantial portion of your budget will go toward product development. Building an app or software from scratch could cost between $50,000–$100,000, or more.

• You can often start a smaller-scale operation, such as freelancing or selling crafts, with a minimal investment and grow incrementally.

Target audience

Local businesses can find success when they focus on serving a specific community. Marketing efforts might involve more homegrown outreach, such as flyers or ads in the local newspaper.

In contrast, global businesses—such as those that ship products internationally or market their services worldwide—might need to invest in ecommerce infrastructure, international shipping logistics, and multilingual customer support; these all can be cost prohibitive for smaller enterprises.

Specialized equipment needs

The type of equipment required varies widely by the type of business. Some examples include:

• Construction or landscaping: You’ll need more costly tools, vehicles, and machinery to operate. Even if you lease equipment, you should expect to make high monthly payments.

• Creative industries: A design studio or videography business might require advanced software, high-end cameras, or editing suites, which can quickly add up.

• Retail: Beyond shelves and displays, you’ll need reliable point-of-sale (POS) systems and possibly a storefront design customized to your brand.

Staffing needs

Labor-intensive industries such as restaurants, retail stores, or construction firms often require staffing up from Day 1, so payroll and benefits can become substantial startup costs.

Solo ventures that freelancers or consultants might pursue can start alone, which keeps labor costs near zero until they scale.

Marketing approach

Niche businesses with a small but specific target audience, such as collectors or hobbyists, can use a more focused, cost-effective marketing strategy (e.g., direct ads, community events).

Mass-market businesses aiming for broad appeal, such as consumer tech or fashion brands, often need to invest in large-scale campaigns to build awareness—which requires a larger budget up front.

How do you estimate your startup budget?

Online-only business owners spend an average of $35,000 in their first year of business, and storefront business owners spend an average of $100,000, but every company is different. Estimating your startup budget requires a mix of research, realistic planning, and a bit of educated guesswork. It requires understanding the specifics of your business model and industry, while leaving room for the unexpected. Here’s how to estimate your budget.

Define your business model

Start by being clear about what you’re building. Are you launching a product-based or service-based business? Is it digital or physical? Each decision affects your cost structure. Write out your operating plan, so you know what you’ll need to run the business from the start.

Categorize your costs

Break down your startup expenses into categories. This can make it easier to estimate specific costs and avoid missing anything. Some major categories could be:

• One-time costs, such as incorporation fees, equipment purchases, website development, or initial inventory

• Recurring costs, such as rent, utilities, payroll, software subscriptions, and marketing campaigns

• A contingency fund (typically about 10%–20% of your budget) for unexpected expenses

Research market rates

Costs vary by location, industry, and scale. Be sure to research:

• Location-based expenses: Check average rents or coworking space costs in your area. If you’re planning for a physical location, contact commercial real estate agents for accurate figures.

• Vendor quotes: Reach out to suppliers for inventory or equipment pricing. If you’re unsure about production costs, request estimates from multiple manufacturers.

• Tech costs: Evaluate pricing plans for the software or platforms you’ll need, including accounting software, project management tools, or ecommerce platforms.

Map out your startup phases

To avoid one big spending deluge, divide your budget into phases. These might include:

• Prelaunch costs: This first phase is for expenses that need to be made before you can officially open, such as licenses, prototypes, or initial marketing.

• Initial operating costs: These are expenses to cover your first three to six months. They might include rent, payroll, or advertising.

• Scaling costs: Once the business gains traction, you’ll need to consider the cost to scale, including hiring or expanding your inventory.

Estimate fixed and variable costs

Fixed costs don’t change based on sales volume, while variable costs fluctuate with your business activity. Fixed costs might include expenses such as rent, salaries, and insurance, while variable costs might include expenditures such as materials, shipping, or production. Understanding this distinction can help you assess how your costs might change as your business grows.

Factor in professional help

If you’re not handling every aspect of the business yourself, make sure you account for professional fees, such as:

• Legal counsel and accountants: These experts can help you incorporate your business, pay taxes, and manage the books.

• Freelancers or contractors: You might hire designers for branding, developers to build your website, or marketers to create ad campaigns.

Account for marketing

Marketing costs can vary widely. Online businesses might need to invest in social media ads or email marketing tools, while brick-and-mortar businesses might invest in local advertising, signage, or grand opening events. Try starting with a smaller budget and allocating more as you see what resonates.

Build a cash flow buffer

Your business probably won’t be profitable right away. Estimate how much cash you’ll need to sustain operations until revenue starts coming in consistently. A general best practice is to have enough cash to cover at least three to six months of expenses.

Use a budget template or software

Programs such as Microsoft Excel, Google Sheets, or a dedicated business planning software (e.g., LivePlan, QuickBooks) can help you stay organized. Your budget should include:

• Line items for every expense

• Columns for estimated, actual, and ongoing costs

• A section for contingency funds

Validate with experts or peers

Share your budget with someone experienced in your industry, such as a mentor, accountant, or business advisor. They might be able to help point out any overlooked costs or suggest adjustments based on their real-world experience.

Adjust and iterate

Your first draft budget might not be perfect, and that’s fine. Once you start putting money into the business, track your expenses closely and revise your budget as you go. The goal is to create a flexible but realistic financial roadmap.

What are the overlooked costs of starting a business?

Starting a business entails plenty of costs you can plan for, but there are some that can sneak up and derail your budget. These are the expenses that might not be obvious at first glance but are almost inevitable. To stay on top of these costs, always carefully track your expenses and regularly reassess your budget to see what you might be missing. It’s also a good idea to ask peers or mentors in your industry about costs that caught them off guard when they were starting out. Here are some of the additional costs to be mindful of as you start your business.

Administrative and legal surprises

Even if you think you’ve accounted for all the legal and administrative basics, overlooked details can include:

• Filing fees: Beyond registering your business, there might be recurring fees for annual reports, renewals, or compliance filings.

• Expert advice: Lawyers and accountants often charge by the hour, and these fees can mount quickly—especially when you’re working on complex contracts or taxes.

• Permits and inspections: Some industries (e.g., food, health, or construction) require multiple permits and inspection fees.

Taxes and fees

Taxes can hit harder than anticipated, especially when you’re new to running a business. Here are some tax-related costs to account for:

• Self-employment taxes: If you’re not used to paying these, they can be a shock. In the US, for example, plan for 15.3% of your income.

• Sales tax, VAT, or GST: New business owners might forget to factor in sales tax, value-added tax (VAT), or goods and services tax (GST) systems or mistakenly spend money they’ve collected but owe to the government.

• Business property taxes: If you own property such as office space, some jurisdictions charge annual property taxes.

Employee-related costs

Even if you start with a small team, hiring employees can carry some expenses you might not have considered, such as:

• Payroll taxes: Beyond salaries, and depending on your location, you’ll likely owe taxes for social programs such as social security, Medicare (in the US), and unemployment insurance.

• Employee benefits: Health insurance, retirement plans, and paid leave aren’t mandatory in all cases, but they can be important for attracting and retaining talent.

• Onboarding and training: Budget in the time and resources it takes to train new employees or contractors, even for entry-level roles.

Technology and software

Having the right technology is important, but it can cost more than anticipated. Costs you might not foresee include:

• Subscription creep: Tools such as accounting software, project management platforms, or marketing apps might start as minor expenses, but they can grow as you add features, users, or integrations.

• Upgrades and maintenance: You might budget for initial hardware (e.g., laptops), but ongoing maintenance, replacements, and updates should also be factored in.

• Cybersecurity: As your business grows, you might need to invest in firewalls, virtual private networks (VPNs), or data breach insurance.

Additional marketing and branding

Your marketing budget can balloon despite your best laid plans. Among these expenses can include:

• Rebranding or redesigns: What works early on might not be enough as you grow. The need to rework logos, websites, or packaging might come sooner than expected.

• Advertising testing: Marketing isn’t a one-time cost. Testing campaigns, keywords, or platforms can add unforeseen expenses.

• Content creation: Photography, videography, or copywriting services for blogs and social media can easily run into the thousands.

Operating expenses

Running a business day-to-day includes its own extra costs, including:

• Utilities: It’s easy to underestimate the cost of water, electricity, and internet for physical locations. These costs also fluctuate seasonally.

• Shipping and logistics: Even if you plan for shipping costs, factors such as returns, damaged goods, or delays can rack up other fees.

• Waste or shrinkage: Damaged goods, theft, or unsellable inventory can reduce profits in product-based businesses.

Costs to your time

Your time is a valuable resource, and overlooked costs often show up here, including:

• Administrative overhead: Bookkeeping, managing vendors, or handling customer support can eat up hours that could be spent growing the business.

• Learning curves: If you’re new to certain software or project management systems, the time spent learning can affect your productivity.

Insurance and risk management

Businesses need to insulate themselves from risk as best they can, which begins with insurance. However, it can often extend into other scenarios. Here are some risk-related fees a business owner might encounter:

• Business insurance premiums: Costs can increase with growth, new hires, or additional equipment.

• Coverage gaps: If something unexpected happens—such as a flood in your office or a lawsuit—you might find your initial insurance plan doesn’t provide adequate coverage.

• Liability claims: Businesses in high-risk industries might face lawsuits or claims that require additional legal fees to address.

Costs to scale

As your business grows, costs can rise in unexpected ways. These might include:

• Software tier upgrades: Free or low-cost plans often cap out, and scaling up means paying for premium service.

• Hiring specialists: You might need to hire consultants, IT support, or marketing experts as your business grows.

• Infrastructure changes: Scaling could mean moving to a bigger office, purchasing new equipment, or updating systems.

Emotional and personal costs

Running a business can take a toll in ways many people don’t anticipate. This can lead to additional costs, such as:

• Increased stress: Stress management can lead to spending on therapy, coaching, or self-care.

• Missed income opportunities: If you’re working on your business full time, you might miss out on other income sources—especially in the early stages.

• Relationship strain: Time away from family and friends can impact personal relationships, which might lead to indirect costs (e.g., hiring help at home).