December 9, 2023


Supportive Business Potential

Average Cost Of Starting A Small Business

Average Cost Of Starting A Small Business

Starting a business and being your own boss is a dream many Americans chase after. But while dreaming of starting a business is free, actually starting a business and getting it off the ground takes time and money.

While your initial startup costs will depend on the kind of business and industry you’re getting into, there are many expenses you and your budget will need to account for. From legal costs and licensing, to marketing, inventory and labor, here’s what you and your wallet can expect if you decide to embark on the journey of being your own boss.

Small business startup costs

Average hourly pay for an administrative assistant is $17 per hour.

You can expect to pay an upfront cost of around $200 to build a simple website on a platform with built-in templates, with an ongoing cost of around $50 per month to maintain your site.

Adding a new employee to your payroll will typically cost you 1.25 to 1.4 times the salary you’re paying that employee, once you’ve factored in pay, insurance and tax costs.

Average cost by industry

Your average startup costs will vary greatly depending on the field or industry you’re hoping to tap into. Your industry will determine your entire business model, your inventory needs, your marketing strategy and your costs to produce your goods or services. Here’s a closer look at a few industry averages:

*Averages from and Starter Story

How much does it cost to start a small business?

Industry averages can help give you a general idea of how much you can expect to spend when starting a small business. However, your actual costs will vary depending on the size of your business, whether you’ll have a physical or online location, number of employees, cost to produce goods and more.

Often, your location and the amount of inventory you need will play a huge role in how much you pay to produce your goods at the necessary scale. As your business grows, you’ll need to be strategic about keeping your costs low and making sure you’re opting for the most affordable materials to see the biggest return.

Costs to consider

While some start-up costs like the downpayment for your space are fixed, others like your taxes, payroll, or legal costs can fluctuate year over year. This is when having an organized budgeting system can help you plan for these costs and account for any changes that may come your way. Here’s a look at how much you can expect to spend on your fixed and variable costs.

How to save on these costs

Some of these averages might startle you, but many business owners take advantage of low-interest U.S. Small Business Administration (SBA) loans and small business credit cards in order to cover their start-up costs until they’re profitable and can cover expenses on their own.

If you decide to go this route, you’ll need to meet a few requirements. According to the SBA, eligibility for a loan requires you to be a for-profit business, do business in the U.S., have invested equity and have exhausted your financing options. Consider applying for a business credit card to help you cover your costs and they typically have fewer eligibility requirements.

You might also consider trimming your overhead to make your start-up costs a bit more manageable. Starting an online business is one way to reduce or eliminate office space and insurance costs, and save a little extra while you’re getting your business off the ground.

FAQs on starting a small business

How do you calculate start-up costs?

The first step in starting any business is to figure out how much it will cost you to run it. Once you’ve decided what business you’d like to start, you’ll need to calculate what your profits might be and how that will grow over time. Start by conducting a break-even analysis to determine when your business will become profitable. Secure any funding you may need, then calculate what that loan will cost you over time in interest. Attract investors who may be able to provide you with large sums of capital upfront, and determine what the tax implications of starting your business will be. The SBA can help you crunch the numbers and get an estimate.

What do I need before starting to spend money on a start-up business?

You’ll need a business plan and a way to raise capital. Once you’ve made your mind up about what your business will be, you’ll need a plan for how you’ll raise the money to fund your start-up costs, and then a plan for how you’ll invest those dollars to get the maximum return. If you need assistance, the SBA can help you find free counselors to walk you through each step.

What are additional considerations?

When going solo, it’s important that you understand the tax burden that comes with owning your own business, so you don’t have any major financial surprises later on. Consider hiring a tax professional who can ensure you’re aware of all the taxes and fees you’re responsible for.

The bottom line

Starting your own business can be incredibly rewarding, but keeping your costs low and your profits high takes some thorough pre-planning. This includes understanding how much of your own money you’ll need to contribute, how to raise additional capital and where you can trim costs to lessen the financial burden. Once you know how much you’ll need to get started, you can put together a strategy to understand how to get the highest return on that initial investment and run a profitable business.