How Much Does It Cost To Start A Business?

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A business is an investment. You need to pour money into it in order to make money out of it – but just how much do you really need to spend?

It’s impossible to answer this question with a single figure given that almost every business is different. Most businesses cost $2000 to $5000 to get started. Others cost much less than this (particularly solo home businesses), whilst others cost much more (restaurants and factories can cost more than $20,000 to get started).

It’s important that you know exactly which costs to budget for so that you raise the right amount of funding. Here are just several of the most common costs and how you can potentially cut costs.

Equipment and software

Some jobs can be done with nothing but a laptop and a phone. Others require a greater range of equipment such as a construction company or a medical clinic.

You can save money on equipment by buying it used and by hiring equipment that you don’t need on a constant basis. You don’t want to go too cheap with equipment as such equipment is likely to be less efficient and it could reflect badly on your professional image.

Investing in software could be necessary too for helping to handle various admin tasks such as accounting and employee management. Being able to have access to software that can help with areas like accounting could help to take the strain off you, as a business owner, to make sure that everything is financially correct. Making some comparisons of software, like freshbooks vs quickbooks could help to make this process a lot easier to handle in the long run. Certain companies may require more niche software such as retail POS software or graphic design software.

Whilst free business software exists, this may not always be suitable for your needs. Always read reviews and take advantage of free trials and demos.


Many companies can be run from home. Most modern retail businesses start off this way to save costs, whilst many service industries can be conducted online.

Other companies may need to invest in premises – this could be office space or a warehouse or a restaurant. Individual costs to consider when looking for premises include rent/mortgage and utility bills.

The location is likely to greatly to affect the costs, as is the size. At first, you may want to start small and look for somewhere that isn’t too central (but not completely out of the way either).

Sharing space could be a way of cutting costs for some business – a lot of businesses do this with office space. You could even consider working from a mobile office or starting a restaurant as a food truck or market stall.

Hiring employees

There are lots of costs associated with taking on employees. This can vary massively depending on how many employees you need and how qualified they need to be. Their wage isn’t the only cost you need to factor in – there could also be employee benefits to consider, recruitment costs and training costs.

You can save money on employees by outsourcing work rather than hiring employees. As a startup, you probably don’t need to hire a full-time in-house accountant and outsourcing one could be much cheaper. You may also be able to get away with hiring part-time employees, but it’s important to give them a workload that is relative to their hours.

This guide How To Calculate Labor Costs In 4 Easy Steps could help you to determine exactly how much you need. It could also be worth talking to a HR consultant (which leads onto the next expense…).

Professional advice

All new business owners can benefit from seeking professional advice. Financial advisors can help you to budget, legal advisors can help you to understand your companies legal requirements and HR consultants can help with all employee-related queries.

Other advice you may want to call upon may include marketing advice, IT advice and possibly security advice.

Another option could be to take a course or to attend workshops and seminars. The advice you receive won’t be as personalised, but it could be useful for giving you the general knowledge you need.

There is lots of free advice out there, but obviously you need to be careful of who you trust.

Licenses and permits

In some states, you may be required to pay a fee to register your company. There may also be licenses and permits that you need to apply for – if you’re starting a bar, you will need an alcohol license and possibly a music license and food license too.

Each fee alone is unlikely to be expensive, but lots of fee together may start to add up. Only apply for licenses that you really need.


Any business that hires employees needs to take out employer’s liability insurance. Other non-mandatory schemes could also be worth taking out in certain cases such as public liability insurance and property insurance.

This article What Types Of Insurance Should Small Business Explore? details some of the insurance schemes that you may want to look into. There are general business insurance schemes out there that can offer multiple types of cover, potentially helping you to save costs.


This applies to retail companies and restaurants – any companies that sells products rather than services. Most companies start with a small inventory and build it slowly as they attract more business.

The cost can vary depending on the type of products you sell – a car dealership is going to spend a lot more initially than a grocery store. By negotiating with suppliers, you can bring down costs.


Marketing is essential for letting people know that your business exists.

Building a website should be your first priority. Whilst you can build a website for free, you’re often better off investing in a professionally designed website.

Signage, business cards, flyers, PPC advertising and SEO are just a few other marketing strategies you may want to invest in to help gain exposure. If you are interested in PPC advertising for your business, you may want to look into a marketing agency, similar to this Pay Per Click Management, PPC UK company that could help to keep on top of your digital marketing presence. Due to the growing popularity of online campaigns, SEO and other marketing strategies finding an agency that can help your business grow through online marketing could help to improve your business presence both online and offline. You could even organise a launch party with the help of events marketing professionals.

Of course, there are plenty of free ways to market your business that you can try such as setting up social media pages, sending out emails and networking. However, although these are beneficial, they aren’t always the most effective marketing strategies. That is why many new businesses outsource their marketing, such as PPC advertising, to make sure they are getting the best. For that, you’d need to use a company like eMaximize – the Best PPC Agency in Los Angeles. If you are going to take advantage of paid marketing strategies such as PPC (pay per click) then it might also be worthwhile to look at the likes of this free click guard click fraud tool, this way you always know that you’re protected from fraudulent activities when it comes to your paid PPC campaigns.


Every company has to pay tax. You must pay this each year in the form of an annual tax return. It’s important to budget for this so that you don’t spend all your earnings.

As mentioned earlier, many people buy accounting software or outsource accountants to help with their bookkeeping. This is an extra cost, but it will ensure that your tax is filed correctly.

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