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How Much Does It Cost to Start a Small Business?

Get tips on the types of costs a start-up will incur

Define what you need to spend money on

To estimate your start-up costs, begin by creating two lists — one of things you'll treat as expenses, one for your assets. Don't forget to consider items such as brochures, business cards and website development costs or any security deposits you need to make. Consider whether you need the help of a consultant, tax adviser or lawyer to get started. Next, categorize these items as essential or optional — do you really need to spend money on these before you start making any kind of income?

Assign costs

Now we come to crunch time — assigning specific dollar amounts to your lists. This process is always going to be a best guess, but be realistic and use past experience, research and advice from other entrepreneurs to guide your cost estimates. Organizations such as SCORE and your local Small Business Development Center or Women's Business Center can provide free and valuable advice about how to calculate your start-up costs.

If you use a smartphone, you might want to try the SBA mobile app, which includes a handy tool for calculating start-up costs.

Whatever you do, don't underestimate your costs or try to force your costs to fit the amount of money you have available. If the costs are too high, consider another approach to starting a business.

  • Could you run your business from your home rather than having a separate facility?
  • Instead of buying inventory upfront, could you have manufacturers drop ship directly to your customers?
  • Would you save money if you subcontracted rather than hired employees?
  • What about buying surplus office equipment and furniture from the government at or below cost?

Remember, as mentioned above, start-up costs are accrued before you have any income flowing in. So develop your budget with this in mind.

You may also like: Do you know how to use social media in a job search?

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