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14 Business Startup Costs Business Owners Need to Know

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Deciding to start a business is exciting, but can also be daunting if you're a new entrepreneur. Calculating business startup costs, worrying about long-term profitability, securing startup funding — it can all be pretty stressful.

The question of costs is critical because the initial investment can be significant. A Kauffman Foundations study shows the average cost to be around $30,000, and costs tend to increase each year.

Fortunately, certain types of businesses, such as micro-businesses and home-based companies, have lower financial entry barriers. Here, we’ve put together a list of 14 different types of business startup costs you’ll need to consider when launching your company.

LLC Formation

How to calculate the cost of starting a business

Drafting a business plan is the best way to estimate your business startup costs. Within your plan, the financial projections section should estimate your revenue, profit, and expenses for the next three to five years.

There are other resources to estimate your finances as well, such as the SBA’s startup costs worksheet . Templates will help you estimate your initial investment costs, so you know how much capital you should request when you seek startup funding.

Keep in mind that many of the business startup costs we list below are recurring. You'll need to cover these costs over a monthly, quarterly, or annual basis — think rent, office supplies, and payroll. Other expenses, like the incorporation fee or office furniture, are one-time costs.

When calculating your business startup costs, a good rule of thumb is to be able to cover six months’ worth of expenses upfront. So don’t count on your business’s revenue to start easing your costs until at least after that early period is over. You’ll want a cushion while you get your feet under you and work on attracting business.

>> MORE: Best business budgeting tools

14 business startup costs to plan for

Although this is a typical list of business startup costs, your actual startup expenses depend entirely upon your specific business and industry.

Here are some typical business startup costs to plan for:

1. Equipment: $10,000 to $125,000

Almost every business will need to finance equipment immediately. Equipment costs for startups can range anywhere from $10,000 to $125,000, depending on the industry and size of the company.

For example, if you’re starting your own moving or shipping company, you’ll need to finance a truck. If you’re opening a restaurant, you’ll need commercial-grade ovens, stoves, dishware, and cooking utensils. If you own a hair salon, you’ll need styling chairs. And nearly any business will require computers.

Of course, these costs range according to your industry and the size of your business. Hiring employees will incur additional costs, as you may need to secure individual equipment, as well.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

2. Incorporation fees: Under $300

One of your first to-dos when setting up a business is to choose a business entity, which has tax, legal, and financial implications.

If you decide to incorporate your business or form a limited liability company, you’ll need to file articles of incorporation or articles of organization, respectively, with your state. The filing fee can range from $50 to as high as $725 depending on the state. However, the fee is under $300 in the majority of states.

Even if you’re not incorporating, you’ll probably need to apply for federal or state licensing or permits. The types of documentation you'll need will vary based on your industry and location. For example, businesses within the agriculture or aviation sectors require federal licensing. Service-based sectors may need to have trade-specific licenses. And retail companies will likely need sales tax licenses or permits.

3. Office space: $100 to $1,000 per employee per month

Paying for an office or retail space will be a sizeable portion of your fixed costs, whether you rent or buy. You might spend between $100 per employee per month up to $1,000 per employee per month — again, it will depend on the type of space you're using.

You can mitigate these costs if you work from home in the beginning, or look into coworking spaces — both ideal for smaller businesses. And if you own a service-based business, you can travel directly to clients to further decrease overhead costs.

4. Inventory: 17% to 25% of your total budget

If you’re in the retail, wholesale, manufacturing, or distribution sector, you'll likely need to secure inventory to sell, as soon as you possibly can.

Knowing how much inventory to carry can be tricky: If you have too much inventory, you risk spoilage or damage. If you have too little, you risk losing customers who won't wait for items on backorder. This is especially true for seasonal businesses where inventory can vary drastically year-round.

You should allocate between 17% to 25% of your budget to inventory, depending on your industry. When you’re first starting out, consider securing more inventory. You'll want to attract customers and generate as much revenue as you can in your company's early stages.

5. Marketing: Below 10% of your total budget (even 0%)

Marketing materials might include physical materials, like signs, banners, and business cards. You might also consider paid ads, as well as more creative options, like videos and giveaways, that might require you to hire a consultant or a video producer.

Courtney Barbee, COO at The Bookkeeper, recommends keeping overall marketing costs to a minimum. Specifically, strive to keep your ad materials under 10% of your budget.

The good news? You can do the bulk of your small business marketing, for free. Thanks to social media and other online marketing strategies, advertising costs are often much lower for small businesses just starting now than they would have been 20 years ago.

6. Website: Around $40 per month

When building your business website, you'll want it to look professional, be easy to navigate, and display information about your services, products, hours, and contact information.

Fortunately, services like Wix, Squarespace, and Weebly, make creating a website easy and cost-effective. These content management systems are sometimes free, but premium plans will come at a monthly or yearly subscription cost:

Wix : $13 to $39 per month for a premium plan.

Squarespace : $12 to $18 per month billed annually, or $26 billed month to month.

Weebly : $5 to $25 per month.

Wix and Weebly also offer basic, free website builders. If you’re relatively tech-savvy, it’s easy to build a website through one of these services, no coding background required. But if you’re not very familiar with computers, you may want to hire someone to build the website — which, of course, is an additional cost (although it might become a worthwhile investment).

7. Office furniture and supplies: 10% of your total budget

Office furniture and supplies add up fast. If you’re operating in a traditional nine-to-five office environment, then every employee will need a desk, a chair, a computer, and a phone. Add in break room appliances, small office supplies, and computer programs, like your accounting software, and you’ll reach a hefty sum.

Again, that sum varies depending on the tools your business needs to operate, and the number of employees you need to outfit. Nate Masterson, the marketing manager at Maple Holistics, estimates that the total cost for office furniture and supplies would be around $5,000. In all, though, Masterson recommends keeping your furniture and supply costs to approximately 10% of your budget.

8. Utilities: Around $2 per square foot of office space

In addition to the fixed costs of rent and a down payment, you’ll be responsible for paying the electric, gas, water, internet, and phone bills for your office space. According to Iota Communications, the average cost of utilities for commercial buildings is $2.10 per square foot.

If you intend to install HVAC units, that will incur an additional cost — usually a couple of thousand dollars, not including installation fees and upkeep.

9. Payroll: 25% to 50% of your total budget

You need to pay your employees, even in the early stages, where you’re not bringing in much revenue. Remember, payroll includes all of the following:

Commissions.

Overtime pay.

Paid time off.

Of course, payroll costs will vary across startups. Typically, an employee will cost 1.25x to 1.4x their salary. For example, an employee on a $40,000 salary will actually cost you around $54,000 after factoring in various payroll tax costs and insurance.

A conservative payroll budget could work if you’re a sole proprietor, or if you’re running a small enterprise and use mostly 1099 contractors — and either is a pretty likely scenario for most startups.

10. Professional consultants: Between $1,000 and $5,000 per year

It’s tempting to take a DIY approach for all your business operations. After all, who knows your business best? But working with experts and professionals can be worth the investment.

For example, certified public accountants can explain the different legal structures, help you choose an employee benefit program, and ensure you're fulfilling your responsibilities as an employer. When tax season rolls around, they’ll prepare your tax returns and help you save on your taxes.

You don't need to hire a full-time accountant either. But it’s often a good idea to consult with your accountant on a monthly, quarterly, or annual basis to review your financial statements, and for general financial guidance and advice. Consulting with an attorney regularly can also save you from major legal mistakes like failing to trademark your logo or developing relationships with vendors without a contract in place.

Every CPA and lawyer charges different hourly rates. Rates and additional fees vary depending on the number and level of difficulty involved in the tasks you need outsourced, the time it takes to complete your projects, and your consultant’s tenure. However, you can mitigate these costs by taking on some basic tasks yourself, only outsourcing the most complicated projects. There are even some options to get free business legal advice.

And with the help of good business accounting software, you can handle basic bookkeeping, like processing and managing payroll, creating and tracking invoices, and managing your business bank account.

According to SCORE , all told, the majority of small business owners spend between $1,000 and $5,000 per year on administration tasks, including accounting and legal fees. But as a startup — and by taking advantage of those cost-cutting tactics we mentioned — you’ll probably err on the lower end of that spectrum.

11. Insurance: Average of $1,200 per year

Your business needs the same protections you provide to your health, home, and car. There are many different kinds of business insurance , including protection from customers that file a lawsuit against you and disaster insurance for potential fires that can shut down your restaurant for weeks.

The type of insurance your startup needs is entirely dependent on your business, industry, number of employees, and other risk factors. For instance, a sole proprietor running an online business has far fewer insurance requirements than a construction company with several employees.

Here are a few essential forms of insurance you should look into to protect yourself, and policy costs vary according to several different factors:

General liability insurance : About $400 to $800 per year. Your industry’s risk will be the most significant factor influencing the cost of your policy.

Commercial property insurance: Anywhere from $300 to $2,500+, depending on the value of the property and its assets, and a risk factor dependent upon the nature of the business and the location of the property.

Workers compensation insurance : Approximately $0.75 to $2.74 per $100 of payroll, depending on the business’s size, location, payroll, and risk.

Errors and omissions insurance: Approximately $2,000 to $5,000 per year, depending on your business’s size, industry, location, revenue, legal history, and the quality of your contracts and employee training procedures.

12. Taxes: Variable, but 21% corporate tax rate

When planning your budget, determining the exact amount to allocate toward business taxes can be confusing. It depends on your revenue (which is difficult to predict), your deductible expenses, and your business entity.

Under current federal law, corporations pay a flat 21% corporate income tax. For pass-through entities, business income and losses pass through to the owners' personal tax returns. Pass-through entities can claim a 20% deduction on income before paying their business taxes.

But know that you can often save money and time by working with a CPA. A skilled CPA will determine what you can deduct so that you pay as little as possible.

13. Travel: Variable

Not every new entrepreneur needs to factor travel into their business startup costs. But if you have a consulting business or you visit your customers directly, you will be traveling a lot. You'll need to factor in the price of transportation, food, and lodging — multiply these costs if you have multiple employees traveling. Be mindful of how quickly those costs add up.

Try to keep total travel costs to an absolute minimum so that you can allocate your revenue toward bigger expenses, like payroll and rent. And to make some returns on all that time on the road or in the air, consider using a travel business credit card, which can earn you points and miles for every dollar you spend. If you do have to travel frequently, keep the nonessentials like business class tickets to a minimum.

14. Shipping: Variable

Service-based businesses can probably stop reading here. But if you’re in retail, you might be shipping products to customers. If so, you’ll need to factor shipping into your startup costs, including packing materials and postage. Depending on what you’re sending, these costs can reach into the thousands of dollars.

Services like Stamps.com can ease the burden of shipping costs on small business owners. With this service, you can print postage without having to buy a costly postage meter. If possible, you can secure free or low-cost shipping boxes from your shipping service of choice.

How to save on startup costs

The costs of starting a business can certainly add up, with many expenses being non-negotiable. Do your research before you splurge on high-ticket purchases, and recognize that there are ways to take care of some of these startup costs on the cheap.

For example, using software like QuickBooks can save on the costs of hiring a professional bookkeeper. Working from home or using a coworking space is a cost-effective alternative to leasing office space. And leveraging social media can mitigate your marketing costs.

Some costs are worth the investment. Don’t buy poor-quality equipment just because it’s cheaper — you’ll lose time and money making repairs and eventually need to purchase new equipment. Hire a legal or accounting expert if you’re confused. And make sure your website and advertising campaigns are professional-looking and effective.

Secure funding

If you've calculated your business startup costs and now feel overwhelmed, know that there are plenty of resources to help you find startup financing.

Your initial funding will likely come from a combination of debt and equity financing. But keep in mind that debt financing options — small-business loans — are relatively limited for brand-new businesses. Most lenders only feel comfortable offering loans to established companies with hard evidence of profitability, as well as healthy credit, which most startups simply don’t have yet.

Some lenders work with startup business owners, so don’t completely rule it out if you think it’s your best option. Check out more information on how to get a loan to start a business if you think debt financing is the right move for you.

» MORE: What is a business loan?

Get a business credit card

Once you’ve established a legal entity for your business, we recommend applying for a business credit card.

The application is simple, and a business credit card is usually easier to qualify for than a traditional business loan. Also, you typically gain access to a higher credit limit than your personal card. More importantly, a business credit of card keeps your personal and business finances separate — essential if you wish to maintain your personal liability protections after forming an LLC or corporation.

» MORE: What is a business credit card?

Just make sure you’re not maxing out your credit card or charging more than you can repay. Both can harm your credit score, which might hurt your chances of securing a small business loan down the line.

Frequently asked questions

1. what is the average cost to start a small business.

The cost of starting a small business depends on the type and size of the business you’re opening and your industry. For example, opening a McDonald’s franchise can cost you $1 million, while starting a social media consulting company may cost less than $10,000. The average cost will vary on a case-by-case basis.

2. How do you calculate startup costs?

The most straightforward method for calculating your startup costs is to use a budget template. Your budget will break down your startup costs and recurring expenses — rent, office supplies, payroll, and more.

It’s prudent to cover six months’ worth of expenses minimum upfront; this financial cushion will support you in your business’s early stages when your profit margins might be slim.

3. Are business startup costs tax-deductible?

While the IRS does not recognize startup costs as capital expenditures, they do state that you can deduct $5,000 of business startup and $5,000 of organizational costs paid or incurred after October 22, 2004, but only if your total startup costs are $50,000 or less.

You can review IRS Publication 535 or consult a business accountant for additional information.

4. What is considered a startup cost?

A startup cost is any expense incurred when starting a new business. Startup costs will include equipment, incorporation fees, insurance, taxes, and payroll.

Although startup costs will vary by your business type and industry — an expense for one company may not apply to another. For example, a brick-and-mortar business will need to pay to rent a separate business location, unlike a home-based online consulting company.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

How to Calculate Business Startup Costs

Starting a business from scratch takes a lot out of you, even before you begin operating—whether it’s about selecting a revenue model, securing startup funding, or estimating startup costs.

I already knew it was challenging for entrepreneurs to calculate the startup costs accurately.

However, when I turned up to my computer, researching this article, I discovered so many challenges new business owners face while estimating startup costs that I had overlooked or didn’t pay much attention to earlier.

Thousands of startups close down every single year. 38% of them fail solely because they underestimated their startup costs and ran out of cash. You can’t ignore something like that, can you?

That said, I’m ready to pour my research into the article to help you calculate your business startup costs .

So, you’re ready to begin? Let’s dive right in.

Key Takeaways

• Startup costs are the expenses a startup must bear in the process of starting a new business, while operational costs are the expenses that are incurred during daily operations.
• Different types of business structures, such as sole proprietorships, partnerships, and corporations, have different costs.
• Business insurance, formation fees, licensing and permits, and marketing are some of the most common business startup costs.
• A modern financial forecasting tool is the most efficient method for calculating startup costs.

How much does it cost to start a business?

Startup costs for a small business depend on various factors like business model, location, industry, and scale of operations. Although it’s tough to estimate precisely, Guidant Financial’s 2023 survey reported that the average cost of starting a small business falls between $50K and $1 million .

You must consider the industry, business category, working capital requirements, and other common expenses associated with the business for the accurate estimation of startup costs.

Let’s kickstart this guide by discussing the common startup expenses to consider while starting a new venture.

Common Business Startup Costs to Consider

It is a typical list of expected business startup costs with rough cost estimates you must plan for while starting a new business. Your actual startup costs will entirely depend on your business category and the industry you serve.

Following are some of the most common startup costs to consider:

1. Equipment and tools

It’s no surprise we’re starting the list with equipment and tools. There’s no way a business can operate without the necessary equipment. The equipment costs may range from $10,000 to $120,000 . However, these costs will entirely depend on the business type and equipment requirements.

For instance, starting a food truck would require financing a food truck and expensive kitchen equipment, while starting a small daycare would only require purchasing a few play area equipment.

Here are the average equipment costs for some of the popular business types:

• Restaurant and food trucks: $24,000 to $120,000+
• Small Bakery: $6,000 to $8,000
• Clothing line: $2,000 to $15,000+
• Construction: $10,000 to $50,000
• Law firm: $5,000 to $25,000+
• Barbershop: $1,000 to $2,000

2. Incorporation fees

The first thing you should do is choose a business entity when you plan to form a new business. The most common and preferred business structure types include sole proprietorship, partnership, corporation, and LLC.

The business incorporation or filing fees can range from $50 to $725 in the United States depending on your industry, the state you operate in, and the business structure you choose.

However, the average incorporation fee is $300 in the majority of the states in the US. You may contact your secretary of state’s website to learn more about the filing fees or process for the articles of incorporation or articles of organization.

3. Business licensing and permits

Operating any small business requires specific licenses and permits depending on the industry compliance and regulations. For instance, a trucking company requires a USDOT number, heavy vehicle use tax, and others, while a restaurant may need licenses like food safety and liquor licenses to operate.

Similar to different filing fees for other business structures, the business licensing and permit fees vary depending on the business industry and regulatory compliance. You can expect to spend between $1,000 to $5,000 for your licensing and permitting requirements.

4. Office or retail space

If you’re starting a small business that can be operated from home like a home bakery or an online clothing store, you may not have to worry about office space costs.

But if it’s not the case, paying for an office or a retail space would make up a sizable portion of your fixed expenses, no matter whether you rent or buy the place.

Based on our research, you should spend around $100 to $1200 per employee monthly on your workspace.

However, the actual office space expense will entirely depend on your location and the type of space you’re using.

5. Legal and professional fees

Professional and legal fees may sound like an additional expense while starting up with limited resources, but it’s essential to ensure compliance with regulations and maintain accurate financial records.

You may choose legal assistance for business licensing, EIN registration, and legal paperwork, a business consultant for market research and strategic planning, and an accountant for bookkeeping and tax planning.

You can hire these professional consultants on an hourly basis; their services typically cost around $40 to $150 per hour.  You should spend around $2,000 to $10,000 per year on professional and legal fees.

6. Inventory

Retail, wholesale, distribution, and manufacturing—if your small business falls under any of the mentioned categories, you need an inventory to operate your business. Finding the ideal inventory size to carry can be challenging when entering a new marketplace.

You want to attract more and more customers and make sales in your early days. However, you can’t also risk having too much inventory since it can increase spoilage.

Consider allocating 15% to 25% of your budget to inventory, depending on your industry. You will eventually learn more about inventory management once your business starts operating and making sales.

7. Marketing and advertising

Although it’s an optional expense, marketing is something worth investing in. Your marketing expenses may include physical materials like sign boards, banners, hoarding, paid social media advertising and search ads, or money paid to marketing agencies or consultants.

It is suggested to keep your advertising and promotion costs under 10% of your budget. If you’re working on a really tight budget, there’s no need to spend big bucks on marketing or hire fancy consultants or agencies.

With social media being a free marketing platform, over 47% of small business owners run their marketing efforts themselves, and you can do it, too.

8. Website development

A business website is like an online office where customers can contact you, learn more about your offerings, and seek assistance.

When building a website, make sure it looks professional, is easy to navigate, and displays the relevant information about your product and service offerings, as well as the contact information.

You can either develop a business website using website builders like Wix and Squarespace or hire a developer to do it for you.

Creating a website can range between $1,000 to $10,000 when you hire a developer, whereas you can do it on your own with website builders by spending around 40 dollars a month.

9. Business Insurance

Like you have a house, car, and health insurance, you need business insurance to ensure your business remains intact in troublesome and inevitable times, be it a natural disaster or a customer filing a lawsuit against your business.

The level of security and type of business insurance your business will require depends entirely on your business, industry, and the number of employees you have. For instance, a big-scale manufacturing company with over a thousand employees would require much stronger insurance compared to a home bakery.

Some of the must-have business insurance types include:

• General liability insurance—for all online, offline, and home-based businesses.
• Worker’s compensation insurance—for businesses with 1 or more employees.
• Professional liability insurance—for businesses offering consulting services.

You must expect to spend approximately $500 to $1500 annually on business insurance.

10. Payroll

Payroll is undoubtedly one of the major business expenses most businesses incur. However, there’s no denying how crucial it is to hire quality employees to make your business thrive.

Of course, payroll expenses are employee salaries, but there’s more to it. Your payroll expenses may also include:

• Incentive or bonus
• Commissions
• Paid time off
• Overtime pay
• Travel allowance
• Other benefits

Most businesses spend around 20% to 50% of their monthly budget on payroll. It can be more or less for your business depending on your business and the number of employees you have.

11. Office furniture and supplies

Those planning to have a traditional nine-to-five corporate workplace, be ready to spend some severe bucks on office furniture and office supplies.

When you operate from a corporate workspace, you need a desk, chair, telephone extension, computer, computer programs like accounting software, and, of course, a coffee machine or two.

The cost of furniture and supplies depends solely on your employee strength and the size of the office. However, it’s recommended to keep your furniture and supply costs to 10% of your total startup costs.

12. Utilities

No matter whether you plan to rent or purchase a workspace, you are bound to pay utility bills that include electricity, gas, water, internet, and phone bills for your office.

Unlike other fixed costs, it’s hard to estimate utility expenses, but the average cost of utilities for commercial buildings is $2.10 per square foot , according to a report by Iota Communications .

Besides the electricity, internet, and phone bills, the utility expenses may also incur the HVAC unit installation costs. This heating and cooling system will add a few additional thousand dollars to your startup expenses.

13. Business taxes

How much you’d spend on business taxes will depend on your business entity, tax-deductible expenses, and revenue. Since it’s hard to predict your revenue, estimating the exact amount to allocate for tax preparation may feel a bit challenging.

Under US federal law, corporations pay a flat 21% corporate income tax . If you’re a pass-through entity(a legal entity that passes all its income on to the owners), the business income or losses will pass through to your personal taxes.

However, you, as a pass-through entity, can claim a 20% deduction on income before paying taxes.

 14. Other expenses

Since you’ve reached this section, you must already have a clear understanding of all the expected startup costs, whether they are one-time or recurring expenses.

Here, we will discuss the other costs most small business owners tend to miss or overlook while estimating the startup costs— research expenses and borrowing costs .

Capital is required for starting a business, and equity financing and debt financing are considered to be the most preferred ways to acquire the initial working capital.

Equity financing, however, does not apply to most small businesses since it requires stock issuance. So, securing a small business loan seems to be the most likely source of debt financing for small business owners.

Research expenses, on the other hand, are the expenses incurred even before you started operating, spent on conducting a careful industry analysis and market research.

When calculating your startup costs, make sure to include these two as well.

Since we have already discussed common business expenses, let’s move on discussing calculating the startup costs.

How to Calculate the Costs of Starting a Business

There are various ways to calculate the cost of starting a business. Still, drafting a business plan remains the best way to estimate startup costs.

The financial forecasting section of your plan provides three to five-year projections of revenue, profit, and expense.

The other resources for estimating startup costs include using Upmetrics’ startup costs worksheet or calculator . These resources will help you estimate the initial investment required and determine how much capital or financing you’ll need.

Know that many of the common business expenses we discussed earlier are recurring, with some of them being one-time expenses.

Be sure to categorize them and calculate the recurring expenses on a monthly, quarterly, and annual basis. In contrast, consider expenses like incorporation fees and equipment financing one-time costs.

Sounds like a lot to digest? Get a business planning software like Upmetrics and calculate startup costs in minutes with AI-powered financial forecasting .

Save hours estimating startup costs with Upmetrics

Estimate costs, forecast financials, and prepare a business plan all in one place

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Calculating Startup Costs for Your Small Business

Does your business fall under one of these categories? Excellent. We have startup cost guides for all the business categories listed below. Get a cost estimate for starting the business you plan to launch.

How to Reduce Your Business Startup Costs

Starting a business means being prepared to bear some non-negotiable expenses; there’s no other way around. However, sound research and thoughtful planning can help you save on high-ticket purchases—ultimately reducing your startup costs.

For instance, hiring professional business plan writers can be expensive for a business owner on a tight budget to create a business plan, so they can opt for a business planning software like Upmetrics to draft a business plan at a much lesser cost.

It was just an example, here are a few tips to help you reduce your business startup costs.

1. Create a business plan

It doesn’t make sense. Isn’t it another business expense? How will it reduce costs? Some of you must be having this line of questioning in your mind, but let us clear it up for you.

Brainstorming and listing all the important business costs, and estimating your total startup costs is challenging. Missing out on some critical expenses tends to happen. However, creating a comprehensive business plan makes things easier.

An AI-powered tool like Upmetrics makes sure you don’t miss out on any critical information and helps you properly estimate your startup costs.

Remember, accurate estimation of startup costs is your first step to reducing them.

2. Start small

You don’t need everything or a perfect business setup when you are not making any sales, forget about the business profits. Start small with limited resources and grow your business as it grows financially.

For instance, instead of having a big fancy office for your startup, start with a remote team or a co-working space until you raise capital or gather the necessary resources.

One way of doing that would be listing all the major high-ticket expenses and researching competitive alternatives for them.

3. Lease instead of purchasing

Of course, having your own office or a retail space feels good, but not at the cost of more than 70% of your budget for starting a business. Prefer leasing the place instead of purchasing.

It will leave you with enough working capital or cash to efficiently manage your business operations and handle the other non-negotiable costs.

Furthermore, there’s no guarantee your storefront will find success at the very first location; you may have to relocate if things don’t work out. The further process will be more straightforward with leasing, whereas the same won’t be the case when you own the place.

4. Buy used equipment, tools, or furniture

Since you’re looking for ways to reduce costs and save money, there’s no way for you to have brand-new business equipment, tools, and furniture. You can look for used equipment, tools, and furniture on online selling sites like eBay and Etsy.

Be sure to thoroughly check the equipment before purchasing to avoid any future restoration or repair costs.

5. Funding and business credit card

Now that you have a long list of capital expenditures, you will need financing or funding to manage all these costs. You can’t simply do it all on your own, can you?

It won’t reduce the startup costs but will help you get resources to manage them. Your funding options include debt and equity financing. You may apply for a business loan, reach out to angel investors, or apply for business grants to secure the initial investment for your business.

With limited debt financing options, it could be tough to get through. Applying for a business credit card can be a more accessible alternative to a business loan. You can easily qualify for it while also gaining a higher credit limit than your personal credit card.

Make sure you’re not totally relying on it or taking out more than you can repay. This can negatively impact your credit score, making it harder for you to secure business loans in the future.

And, the final section leads us to our conclusion!

And there you have it. We hope now you have a better understanding of startup cost calculation. What’s next? It’s time to estimate the actual costs of starting a business, be it a bakery, restaurant, or hot shot trucking, and start budgeting.

Get your hands on the modern and AI-powered business planning solution, Upmetrics—and create precise startup cost projections in minutes, just like that.

Frequently Asked Questions

What is the average cost to start a small business.

It is a question with a broad scope for the answer since you can start a business with an initial investment of $100, $1,000, and up to a million dollars or even more. However, the startup and first-year operational expenses fall somewhere between $30,000 to $40,000.

How do you calculate startup costs?

The most easy-to-use method to calculate startup costs is to create a business plan. It’s easier than ever to calculate your startup costs using a tool like Upmetrics. 

Simply head to the financial forecasting feature, get AI suggestions to list your startup and organizational costs, add remaining costs, and let it make the automated calculations for you.

What are business startup costs?

Business startup costs are expenses incurred when starting a new business. These can be your marketing costs, payroll expenses, or any other costs involved. These can either be recurring or one-time costs. 

For instance, your advertising costs are recurring, whereas incorporation fees are a one-time expense. Although there can be some common startup expenses, the value or costs for them may not be the same for two different businesses.

What is the difference between startup costs and operational expenses?

Startup costs are the expenses small businesses incur when starting a new business, whereas operational expenses are those incurred during normal day-to-day business operations. 

For instance, equipment financing can be considered a startup cost, whereas inventory or marketing costs can be your operational expenses.

What are the examples of start-up costs?

The following can be considered as a few examples of startup costs:

• Equipment costs
• Inventory expenses
• Business licenses and permits
• Marketing and advertising expenses
• Payroll expenses
• And others.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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Understanding Common Business Startup Costs

Additional startup cost considerations, the bottom line.

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How to Estimate Business Startup Costs and What It Covers

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Starting a business involves much more than just setting up an office or choosing furnishings. It demands careful financial planning and precise accounting, particularly in the initial stages.

Many new businesses make the mistake of not properly estimating and budgeting for startup costs, relying too much on a sudden influx of customers. This approach often leads to poor results and even the business's failure . A solid financial plan is key not only for managing startup costs but also for building a foundation for your venture's future growth.

Key Takeaways

• Startup costs are expenses incurred while establishing a new business. They can be divided into two categories: pre-opening and post-opening. 
• Pre-opening startup costs include a business plan, advertising, employee training, professional services, and setting up books and records.
• After the business opens, costs shift toward advertising, promotional activities, and employee salaries.
• Different types of business structures—like sole proprietorships, partnerships, and corporations—each have unique startup costs. Understanding these variations is crucial as you plan your budget and financial strategy.

Startup costs are the expenses a new business faces during its creation. Unfortunately, starting a business with no money is challenging and not an option for most businesses, which will require capital to start operations. Each business is unique and thus incurs different types of startup costs depending on its nature of operations.

For example, online businesses, such as e-commerce websites, often have lower initial capital requirements than brick-and-mortar businesses, such as restaurants. This difference in startup costs may stem from online businesses needing less physical space, fewer furnishings, and often fewer staff compared to brick-and-mortar operations.

Despite these differences, several expenses are common across most types of businesses. These typically include costs related to legal or attorney fees, licensing, initial inventory, market research, and marketing efforts to launch the brand.

Keep detailed records of all your startup expenses from the beginning. This not only helps with budgeting and planning but also ensure you can take full advantage of any tax deductions available for startup costs.

The Business Plan

Creating a business plan is crucial for starting a business as it provides a detailed roadmap and prompts careful consideration of various startup costs. Underestimating these expenses can lead to an inflated expectation of net profit, which can be detrimental for a small business owner. Hiring a consulting firm or a business plan writer to assist with creating a business plan can cost between $1,000 and $5,000 or more. The final price often depends on the complexity and length of the plan.

Research Expenses

Before launching a business, it's crucial to thoroughly research the industry and target consumer demographics. Some business owners opt to hire market research firms for this purpose.

Hiring a market research firm is essential for companies wanting to excel in competitive markets. These firms offer key insights into customer preferences and industry trends, using both qualitative and quantitative data to inform strategies ranging from product development to marketing. Their analysis helps businesses make informed decisions and identifies potential risks and opportunities.

For business owners who choose to follow this route, the expense of hiring these experts must be included in the business plan.

Borrowing Costs

Starting up any kind of business requires an infusion of capital. There are two ways to acquire capital for a business: equity financing and debt financing. Equity financing usually entails the issuance of stock, meaning the company offers shares of its ownership to investors in exchange for funds. However, this doesn't apply to most small businesses, which are proprietorships and don't issue stock.

For small business owners, the most likely source of financing is debt in the form of a small business loan . Business owners can often get loans from banks, savings institutions, and the U.S. Small Business Administration (SBA). Like any other loan, SBA business loans come with principal and interest payments that need to be carefully planned for when starting a business, as failing to make these payments can result in severe consequences.

Insurance, License, and Permit Fees

Many businesses are expected to submit to health inspections and authorizations to obtain certain business licenses and permits. Some businesses might require basic licenses while others need industry-specific permits.

Carrying insurance to cover your employees, customers, business assets, and yourself can help protect your personal assets from any liabilities  that may arise. 

Technological Expenses

Technological expenses include the cost of a website, information systems, and software, including accounting and point of sale (POS) software , for a business. Some small business owners choose to outsource these functions to other companies to save on payroll and benefits.

Equipment and Supplies

Every business needs equipment and basic supplies, which are crucial components of startup costs. When planning these expenses, you must decide whether to lease or buy the equipment. 

The state of your finances will play a major part in this decision. Even with sufficient funds to purchase equipment outright, it might be more practical to lease initially, with the option to buy later, especially if other unavoidable expenses arise. However, it's important to remember that, regardless of the cash position , leasing isn't always the most beneficial option depending on the type of equipment and the lease terms.

Advertising and Promotion

A new company or startup business is unlikely to succeed without promoting itself. However, promoting a business entails much more than placing ads in a local newspaper.

It also includes marketing —everything a company does to attract clients to the business. Marketing has become such a science that any advantage is beneficial, so external dedicated marketing companies are most often hired.

Employee Expenses

Businesses planning to hire employees must plan for wages, salaries, and benefits, also known as the cost of labor . This includes not only direct payments but also any additional benefits that contribute to employee compensation packages, including health insurance, retirement plans, and bonuses.

Failure to adequately compensate employees can result in low morale, mutiny, and bad publicity, all of which can tarnish a company's reputation and be disastrous for the business.

Set aside some extra money for any overlooked or unexpected expenses. Most companies fail because they lack the cash to deal with unexpected problems during the business season.

It's important to note that the startup costs for a sole proprietorship differ from the startup costs for a partnership or corporation. Some additional costs a partnership might incur include the legal cost of drafting a partnership agreement and state registration fees.

Other costs that may apply more to a corporation include fees for filing articles of incorporation, bylaws, and terms of original stock certificates.

What Are Business Startup Costs?

Startup costs are the expenses required to create a new business. Once the business is operational, these costs can be broadly categorized into pre-opening and ongoing or operating expenses . Pre-opening costs may include expenses for developing a business plan, market research, securing a location, and initial marketing. Ongoing costs typically involve operational expenses like employee salaries, utilities, and inventory replenishment.

What Business Startup Costs are Tax Deductible?

Tax-deductible startup costs generally include essential expenses for establishing a new business, such as market research, opening advertisements, and employee training salaries. The IRS allows new businesses to write off startup expenses of $10,000 in startup costs and $5,000 in organizational costs in the year the business begins. However, total startup costs must be $60,000 or less and organizational costs must be $50,000 or less. If the costs exceed the maximums, the remaining has to be amortized.

How Do I Calculate Business Startup Costs?

To calculate your startup costs, first identify all necessary expenses like office space, equipment, licenses, permits, salaries, and marketing. Estimate each expense by researching online and consulting with mentors or similar businesses. You can then organize these costs into one-time and monthly categories, then calculate a total to understand your capital needs. Calculating your expected startup costs can help you secure funding, attract investors, and launch your business successfully.

Understanding and planning for startup costs is crucial for any new business. These costs include pre-opening expenses, like market research and business plans, and post-opening expenses, such as marketing and employee salaries. Every business has unique costs, but common expenses often involve legal fees, permits, equipment, and technology.

Accurately estimating your startup costs is key for any new founder. Realistic figures can help secure funding from investors or banks and ensure smooth operations. Keeping detailed records from the start can also help you in financial planning and maximizing tax benefits.

Internal Revenue Service. " Why Should I Keep Records? "

PlanBuildr Business Plan Software. " How Much Does a Business Plan Cost? "

U.S. Small Business Administration. " Fund Your Business ."

Internal Revenue Service. " Publication 583, Starting a Business and Keeping Records ." Pages 9-10.

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Small Business Startup Costs Explained 

3 min. read

Updated March 4, 2024

What will it cost to start your business ? 

While every business is unique, there’s a common approach to helping you figure out what it’s going to take to get your business off the ground and sustain it as sales ramp up.

And, knowing the startup costs for your new business is critical before you launch. Underestimating the funds required could leave you without enough cash in the bank and heading towards failure before you even get started.

Read this guide and learn to calculate, manage, and minimize your startup costs. 

• What are startup costs?

Startup costs are what a business spends to get up and running before generating revenue. 

Starting costs vary based on business type but often include expenses like lease payments, permits, and market research. They can also include asset purchases such as vehicles, real estate, and equipment. Crucially, starting costs also include the money that you need to have in the bank to cover expenses as your business launches until your sales have grown enough to cover those expenses.

• Startup cost examples

Starting costs typically include expenses that occur before you start selling and major purchases, otherwise know as assets.

Startup expenses

• Permits and licenses
• Incorporation fees
• Logo design
• Website design
• Brochure and business card printing
• Down payment on rental property

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• Cash to cover operations until sales can cover expenses
• Improvements to your chosen location
• Vehicles used for business operations
• Intangible assets like trademarks, copyrights, and patents.
• Why calculate startup costs?

Knowing your initial costs and expenses improves your chances of launching successfully . It helps you:

Avoid unnecessary risks:

You can avoid unexpected financial pitfalls and make informed decisions by understanding potential expenses.

Start your financial plan :

It helps you budget and determine if you have adequate funds to launch and operate until you’re profitable.

Convince investors :

A detailed breakdown of startup costs can make your business more appealing to investors, as you’ll demonstrate thorough planning and financial acumen.

Improve decisions: 

With a clear view of costs, you can make decisions about pricing , scaling, and other critical areas more confidently.

• What are your startup costs?

Starting costs vary from business to business. So, how do you know your costs and, more importantly, how much money you need to cover them? 

Check out the following resources to answer those questions.

How to calculate your startup costs

Accurately estimate startup costs by accounting for expenses, assets, and cash.

3 Steps to Figure Out How Much Money You Need to Start a Business

How much cash will it take to start your business? Your total cash must go beyond startup costs and ensure you’re prepared to cover emergencies and initial growth.

How Much Should You Personally Cover for Startup Costs?

Before covering any business expenses, consider the impact on your personal finances. What’s the right amount? How will you pay yourself back? And are the rewards worth the risk?

• Tips for managing startup costs

Follow these steps to minimize unnecessary expenses and prioritize the right things.

How to reduce your startup costs

Keep your startup expenses in check and save money through proper planning, tracking, and exploring possible tax deductions.

Hidden startup costs you may overlook

It’s challenging to account for everything. Don’t let overlooked fees and expenses immediately throw off your budget.

What you won’t regret spending money on as a business owner

There is such a thing as being too frugal. But where should you invest more money? While it depends on your business, you can start with these recommendations from a seasoned entrepreneur.

Get the rest of your business finances in order

Knowing what it costs to start your business will make it far easier to get your finances in order.

Check out the rest of our startup financial resources to better understand your path to profitability.

• Create your financial plan
• Set up accounting and payroll
• Prepare for funding

One-page business plan template

A quick and easy way to list out your expenses and explore how they fit into your overall business.

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Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

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How to make a business plan

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How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

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Business Startup Costs in 2022: What Small Business Owners Can Expect

Starting a new business is exciting, but it also may come with intimidating startup costs. Before you become a business owner, you’ll want to sit down and estimate the total price tag of the venture. In this article, we walk you through the process of calculating each business startup cost so you can launch your business on the right foot. 

What Are Business Startup Costs?

Every new business owner will run into costs associated with launching a business — but the amount you’ll pay depends on your business type and your needs. You’ll want to know ahead of time estimates of the business expenses you can expect so you aren’t hit with surprising costs you can’t afford during the launch process. 

Business startup costs depend largely on the type of business you open, which can be:

• Brick-and-mortar
• Service provider

When you start a new business, you may pay for things like business formation fees, marketing costs, business insurance, a website, and more. We cover each possible expense in detail below.

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Form an LLC, corporation, or nonprofit, and get an EIN, business license, or registered agent service. Use Nav to find the right business formation service for your business.

How Much Does It Typically Cost to Start a Business?

The amount you’ll pay to start a small business will depend on the business itself. According to a 2021 Shopif y survey , small business entrepreneurs spent $40,000 on average in the first year of launching a new business. But this is an average. 

A small business with a physical location will come with a heavier price tag than a business that is run completely out of a home. You’ll have to pay for things like rent or a commercial mortgage, furniture, and physical marketing materials. But you’ll also need more insurance coverage since you’ll have a business location where customers or employees could hurt themselves. 

You can use this startup costs worksheet from the U.S. Small Business Administration (SBA) to help guide you through your estimate process.

10 Most Common Startup Expenses

In the first year of running a small business, you’ll likely encounter two types of costs:

• Capital expenditure : One-time purchase or debt that invests in the future of your business. This can include purchasing new property, facility upgrades, updated equipment, or patents. 
• Operating cost : Ongoing expense that allows your business to run in an efficient and productive way. Marketing, payroll, insurance, and research falls into this category.

The amount you pay for each operating cost depends on how much of the work you do yourself and how much you offload onto a professional that you’ll have to pay.

Here are the 10 startup expenses you’re most likely to encounter.

1. Research costs

Conducting market research before you launch a business can bring clarity to how effective your products or services will be. You can subscribe to a marketing research platform for a more affordable but more do-it-yourself option. Or you can hire a market research firm. According to the Vernon Research Group , hiring a market research firm can cost anywhere from $4,000 to $50,000, depending on the type of research you conduct.

2. Getting a business plan written

A business plan is an essential document that establishes your business structure and goals. You can write your own informal business plan or subscribe to software like LivePlan to guide you through the process, which charges a monthly fee. 

Otherwise, you can turn to a business plan company to complete it for you. If you hire a professional service to write your business plan, you can expect costs to start around $1,500 and increase with complexity. 

3. Business formation fees

How much you’ll pay for business formation depends on the business entity type you choose. A sole proprietor won’t have costs directly associated with founding a business, but an LLC will need to pay to file articles of organization (or if you’re incorporating, articles of incorporation). Filing fees depend on the state you live in but typically cost between $50 and $100, and may cost as much as $300. 

You may also have to pay for a state or federal business license , depending on your industry. Associated costs depend on the license.

4. Insurance and permits

Business insurance can provide protection if you need to pay for claims against your business. Without insurance, you’ll have to pay upfront for the damages and potential legal fees. You’ll likely need different business insurance if you run a fully online business than if you operate an office space, for example. 

The most common types of business insurance are:

• General liability insurance : Protects against “general” claims for property damage, bodily injury, or personal injury. The cost is determined by how risky your industry is, like retail vs. construction. 
• Errors and omissions insurance : Covers mistakes you or your employees make against customers or clients. The price depends on factors like the size of your business, the industry, revenue, and its employee training process.
• Commercial property insurance : Protects offices or brick-and-mortar locations against damages from instances like flooding, fire, theft, or vandalism. The cost depends on factors like the property value and its assets, as well as its location. 
• Workers compensation insurance : Pays for medical and benefit costs for employees that get hurt or ill while working. The cost of your workers’ compensation policy depends on the state, business size, payroll, and your industry’s risk. 

Having a business website that looks good and is functional is essential — it acts as the face of your business. Hiring a web design company to create a website for you can cost into the tens of thousands of dollars, but it can be worthwhile to pay this cost upfront to ensure that your site is everything you need it to be. You’ll also need to consider hosting options, which can determine how quickly your website loads when customers visit, and how much traffic your site can handle.

There are several affordable do-it-yourself website builders and hosting services out there, including:

• Squarespace : You can use this website builder to create a business website for between $16 and $49 per month. 
• Weebly : Create a business website for between $0 and $26 per month. 
• Wix : Its website plans cost between $16 and $45 per month. 
• Shopify : You can set up an online shop for between $29 and $299 per month. 

6. Setting up accounting systems

You don’t want to skip figuring out your accounting process before you start a business — or you may find yourself under a mountain of paperwork come tax time. Some accounting solutions cost money. To start with, opening a business bank account is a great way to separate your personal and business expenses from the beginning. (And you may pay a monthly fee, depending on the account). 

In terms of tracking your transactions, you can do it for free manually using a spreadsheet or pay for software that automates much of the process:

• QuickBooks : $30 to $100 per month
• FreshBooks : $15 to $50 per month
• Xero : $12 to $65 per month
• Wave : Accounting software is free

Connecting your business checking account to accounting software can simplify your bookkeeping and accounting. You can import your transaction information to easily see your business’s cash flow and expenditures. When it comes time to pay your business taxes, you can send this information directly to your bookkeeper or CPA. 

7. Marketing expenses

You may not need to pay for marketing, but if you do, it’s good to keep costs below 10% of your total budget. Your business may benefit from physical marketing materials, like signs or mailers, or from online marketing. Social media marketing can be free or paid. 

Come up with a small business marketing plan to make sure you are clear on your goals and not spending money without getting results. 

8. Technology and equipment fees

An office or physical location can eat up a large portion of your budget. Whether or not you have an office that staff comes into, you’ll need to equip it. You’ll need reliable technology like a computer and internet access to run any modern business. If you have a physical location or staff office, you’ll need things like office supplies and office furniture. Costs depend on how large the location is and the types of equipment you need.

9. Inventory fees

If you’re opening a business that requires you to keep inventory, like retail or wholesale, you’ll need to estimate how much your initial inventory supply will cost. You’ll want to consider stocking up more inventory in the beginning than you might later. The cost depends on how much inventory you need and what you’re ordering. 

10. Hiring employees

According to Glassdoor, it costs around $4,000 on average to hire someone new. These costs include background checks and drug testing, marketing, posting on job boards, and any internal expenses. These expenses will vary based on your business, but if you’re planning to hire employees for your new business, you’ll need to budget accordingly.

In Total, How Much Startup Cash Will You Need?

As mentioned, the average business startup costs fall around $40,000, but you can do it for much less or much more. The amount you pay for organizational costs depends on factors like your business size, the industry, the state it’s located in, and whether or not you have employees. 

If you complete your startup cost estimate and realize you don’t have enough cash on hand to launch — even though you’re ready in every other way — consider turning to lenders. Small business lenders can give you a leg up to start a new business and help you avoid waiting around for years before launching. 

Nav shows you your best options for small business loans if you need cash for things like capital expenses or business credit cards for help with cash flow. Create a free account at Nav.com to see the financing options you’re most likely to qualify for instantly.

Can You Write Off Startup Costs?

Yes, you can deduct certain startup costs on your tax return, but not all of them. The IRS provides a useful breakdown of what is allowed for a tax deduction for a new business. However, it’s a smart idea to hire a professional accountant to complete your tax return for you because of the complexity involved.

Tiffany Verbeck

Tiffany Verbeck is a Digital Marketing Copywriter for Nav. She uses the skills she learned from her master’s degree in writing to provide guidance to small businesses trying to navigate the ins-and-outs of financing. Previously, she ran a writing business for three years, and her work has appeared on sites like Business Insider, VaroWorth, and Mission Lane.

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Written by Kevin Conner | July 18, 2022

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Many aspiring business owners don’t know where to get started. They have a vision, but thinking about marketing, hiring, product development, and more can become overwhelming. In most cases, the best place to start is crunching the numbers—determining your business startup costs.

Without a budget, you can’t make good decisions, and you can’t make a budget without understanding your expenses.

So to help you keep your business from being one of the many that go under each year, we wanted to outline some examples of typical startup costs so you can better budget your business and know what to expect. After consulting this cost checklist, you should be able to determine a forward plan of action for your new enterprise.

Note that we wanted to focus mostly on online  businesses, but other businesses can still greatly benefit and do some quick adjustments and research to make sure they’re on the right track as well.

Business Startup Costs

Supplies, furniture, and office space, marketing and web presence, inventory and production, fees, taxes, and licenses, having a backup fund, setting up your budget, paying yourself adequately.

You need to be able to support yourself without hurting yourself. If you cut corners in your own personal life (by deeply cutting your salary), it can affect your physical and mental health, which can be a contributing factor to business failure. The Global Benefits Attitudes survey shows a clear link between reduced workplace productivity and increased stress levels. Don’t sell yourself short, and don’t try to cut your own salary first.

Review the real cost of living in your area and be honest with yourself about what you would be comfortable with. Be sure to add health insurance and other benefits (for yourself and your household, if applicable) into that equation.

This is your business. Your personal well-being is a core need to consider. When calculating your salary needs, include:

•        Rent or mortgage payments •        Utility costs •        Child care costs •        Property, luxury, excise, and other taxes •        Insurance (car, home, and/or other) •        Vehicle payments or maintenance costs •        Debt or credit card payments. •        Groceries •        Entertainment costs •        Gifts •        Clothing

Your payroll for your business, especially an online business, can be a complicated item on your startup costs list. As a general rule, payroll is the greatest startup cost for a business. Fundera  considers it to be 25-50% of a total budget.

At the same time, your employees, if you have any, will make or break your business.

An online business has many options and few constraints. It might be in your best long-term financial interest to have someone on your permanent payroll. But you almost never need onsite employees, and you can look to the growing pool of remote workers .

There’s a strong possibility that you’ll want to use freelance help as you start your business, as there are a series of specialized tasks (web development, perhaps some initial marketing, graphic design, and more) that you’ll want help with.

Freelancers vary in cost greatly depending on the level of experience you are looking for. This is also the department where “you get what you pay for” matters most. Don’t let working for your business become a race to the bottom for subpar freelancers desperate for any gig.

You can find freelancers either through job boards, contacts you might have in the industry, Facebook groups, and sites such as UpWork  and Fiverr . Each platform has its advantages and disadvantages, so look for what would be best for your needs. If you need help, consult this resource on how to hire remote workers or hire for small businesses .

As for the business startup costs relating to freelancers, try to tally up the estimated hours and multiply that by the rates you are willing to pay.

Here are a few common examples of freelancers you might hire and what they might cost:

•        Freelance writers (for initial copy) – They are generally paid per word. For quality work you can expect to pay 15 to 25 cents per word. Some writers also charge per project. •        Freelance designers – $25-$300 per hour •        Web Development or Programming – $30-$150 per hour •        Virtual Assistants – $5 to $25 per hour

The rates vary due to location, service, and what the freelancer charges. Typically, US-based freelancers charge the highest rates. Here’s a more detailed breakdown of average freelancer hourly rates .

Just because your business doesn’t have a physical storefront doesn’t mean that you don’t need a space and tools to work with. Many owners don’t consider this until too late when compiling their business startup costs list. We’re here to help you flesh out the ideas likely already floating around your head.

Computer Equipment, Programs, Apps, etc.

Computer equipment can be a notable business startup cost. For security and organizational reasons, we recommend having a separate setup for your online business than for your personal use. Unless you’re in video production or another business that will require a much more powerful setup, the following examples of startup costs can serve as a decent guide:

• A desktop with a monitor or two. We recommend something in the $1,000-$1,500 price range for most people.
• A laptop in the same price range ($1,000-$1,500) is a great choice, although you won’t get as much screen space and performance.
• A printer and scanner will prove necessary, and we recommend you pick something that will last your business a few years ($100-$200 should be a good range to start with).
• Software such as Word and Excel, and a finance tracking program. A point of sale program might also be necessary. These might run you $100-$300 a year for the relevant subscriptions.
• Data breaches can be extremely costly. With this in mind, a security suite and a password manager ( McAfee and Kaspersky are common choices) and a password manager ( LastPass is a fine option) are great investments for about $100 a year. You might also want protective measures for your websites and other online assets.

Home Office Space

You can run your business from your couch, but it is far from the most productive option. You need to invest in a space or working environment  free from distractions for hours at a time. It doesn’t need to be extravagant, but it does need to be comfortable and meet your needs.

As far as furnishing it, you don’t need to let it take over your business startup costs list. You should be able to find everything quite cheaply if you don’t mind things that might be used or mismatched. You can easily find a desk for at or less than $50 and a good chair for the same price. You can find a working lamp for $10 and a filing cabinet for $40-$50. Consider looking at Facebook Marketplace , Craigslist , or similar sites.

Working from home can actually ease your tax burden, but if you can’t make it work, this can easily balloon into one of your largest expenses. Another idea would be to find a coworking space or startup incubator in your area. They often have tiered options, from floating desks to private offices, that can grow with your business.

Read more: Learn How to Start a Small Business at Home

Marketing makes your business stand out from the rest of the pack. You might be intimidated by the huge costs of large marketing firms, but don’t worry. You don’t need to work with a firm when you are starting out. You can DIY your marketing and as you scale, start outsourcing  your marketing tasks to freelancers and/or agencies.

To manage marketing-related business startup costs wisely, you might want to start with some of the following options first:

Use Your Personal Network: You shouldn’t spam everyone you’re connected to, but you should reach out to anyone who would be genuinely interested, via email or social media. Talk to them about what you’re doing. Seek not to just promote your brand but to help people while promoting your brand. The only cost is some of your time.

Note the Importance of Word of Mouth Marketing: As this Invesp infographic  shows, many studies have been done to the effect that word of mouth marketing is by far the most effective long-term option for most businesses. Building a strong reputation is an effective strategy for long-term success, and building a strong reputation is more about your service and product quality than any single expense.

Content Marketing:  This tends to be a long-term investment, which might not sound great for a business startup cost, but content marketing will in time help get more eyes on your online business. Focus on quality, not quantity, and offer information no one else can. As for the cost, you can either hire content specialists (which can be expensive, depending on the field and quality of writing you want) or work on it yourself for the cost of your time. To learn more about content marketing and the potential tactics to use, Content Marketing  Institute is a great resource.

Here is a list of some typical content marketing tasks. As far as the costs, they entirely scale, so you will want to determine your marketing budget and see how much you wish to invest in each method.

• Content creation: refer to freelance writing rates earlier in this article.
• Influencer marketing: Rates range from free product for influencers to thousands per content piece posted, depending on the popularity of the influencer.
• Search Engine Optimization: When you start your business, you can do your own SEO. As you grow, you may want to consult with experts. You can either hire a freelancer (see section above) or use an agency. An agency will cost you the most money, with packages in the thousands of dollars per month. Costs will vary, but here are some industry averages .
• Social Media: Social media marketing won’t cost you anything but your time and maybe a few posting tools to help you stay organized. As you grow, you can hire a social media manager to create content and manage your profiles. We talk more about social media in the next section.
• Advertising : Be careful when it comes to social media advertising . In the past 2 years, competition and cost have drastically increased. So hire a trusted agency, or professional, or learn how to do it from an expert. Costs can range from $40-$60 per hour or more depending if you’re working with an independent contractor to set up your ads or working with a full-service agency.

Web and Social Media Presence

Your web and social media presence is for all intents and purposes your storefront. Even if you have a brick-and-mortar business, it’s a nearly mandatory business startup cost.

Here are the things you need to work on and their associated costs:

Social Media Accounts

Facebook and Twitter are useful platforms to engage with your audience and build a community of followers.

Instagram is another important account to create, especially if you’re dealing with physical products that you want to show off to potential customers. Consider platforms where your audience (or potential customers) spend screen time. Don’t be afraid to start on platforms like TikTok . Even if you don’t have time to invest in different channels, securing the handles will ensure your brand is secure if you want to pursue growth at a later time.

Regarding upkeep and maintenance, you don’t need a professional social media manager in the beginning, as they are simply another monthly cost of running a business that you can spend elsewhere.

Focus on the platforms you think will be most effective for your business, favor in time expenditures, and invest in a few social media management apps such as Hootsuite , Buffer  or Sprout Social   to make things easy on yourself. The plan/app will cost $30-$100 a month (some have a free option).

A Quality Website

Since in most cases this will be your storefront, your website is a business startup cost you’ll want to make a priority. Look into getting professional help, but note the tiers of cost:

• A fully functional bespoke (100% custom) website can cost you upwards of $10,000, but you likely don’t need to start there.
•   $50-$100 for the basic template. (Here’s a popular WordPress template gallery )
• $25-$50 per hour for a developer to customize the template
• Additional varying costs based on the content you want on your site (see freelancing costs).
• Another few hundred per year for additional features such as security measures, an SSL certificate, guarantees and support costs, and miscellaneous website expenses.
• You can use sites like  UpWork  to get contractors to bid on your website project. You may be able to get a basic functional site for your business for a few hundred dollars. Just make sure to check the reviews of the applicants and choose providers with a long work history and good reviews.

If you have a little technical know-how and you want to load the WordPress template yourself and tinker around with it, you will only need to purchase the template. Templates come with customization instructions that don’t require a developer. You will, however, need a developer if you want to go above and beyond the template’s capabilities.

WordPress Alternatives

If you are starting an ecommerce business, Shopify  is an all-in-one website creator. Similar to WordPress, you can customize the templates within Shopify’s capabilities, but above and beyond that will require a developer. In most cases, most ecommerce businesses do not need a developer, as Shopify offers many apps that cover most ecommerce needs. Pricing starts at $29/month.

If you are running an agency, or freelancing or consulting or starting a creative endeavor, Squarespace  may be an option. The templates and customization are limited but they are modern and beautiful. Squarespace will be an option if you are looking for something simple and streamlined. Pricing starts at $12/month billed annually.

Note that these options above include  website hosting and maintenance in the price. That’s why there is a monthly fee. If you go with WordPress.org, you will have to secure your own hosting.

Web Hosting

Web hosting will, at least at the start, cost you perhaps $10 a month, and scale up from there. The domain name will be an additional few dollars a month, and outside of that it depends on the tools and other services you might be using.

We would like to note that professional help in this area is often worth it. The hours you would have to put in to create a great website can often be costlier than hiring someone else.

Inventory is a wildly varying business startup cost. If your online business is service-based or you don’t have any inventory to worry about, please feel free to move on to the next section.

Otherwise, the main priority from a business startup cost perspective is to make sure that there is always enough product available to fulfill orders. If you can’t fulfill orders, you can’t make any profit and you’ll likely lose customers.

Consider the following factors:

• Do the products expire or age in any way? Does it require any special type of storage conditions in order to maintain optimum quality?
• How easily can you restock? Is there anything that, at times, might be unavailable? How long does a manufacturing order or shipment to your processing center (or office) take?
• How quickly do you expect products to sell? Does your business focus on moving a lot of inventory or selling the right, more expensive items to a few buyers?
• Can you scale up storage in the event of success? You don’t want to be caught unaware by an unexpected spike in sales.

You will also want to consider storage costs, which can similarly vary based on the nature of your products. Look into what’s locally available or consider an external fulfillment service.

If you are handling manufacturing or creating your own products, you will need to consider production costs. The numbers here will vary so greatly that only you can do the math, but we do have a few tips and action items:

• You can mitigate some of the production costs through bulk orders, but you’ll become a little less adaptable in the process. What if you want to change your design or model after you start? What if you find a small design flaw in the first batch? You will need to strike the right balance.
• A manufacturing partner can be expensive, but things like reliability and accessibility mean a great deal and can be worth the added cost. For example, if a factory shuts down, has other orders, or simply goes off the grid for a few days when you need to reach them, those lost days will eat into your profit margin.
• If you perform production yourself in any way, you will want to consider the costs of scaling up should you find success. Can you reasonably put more time and effort into creating more cakes, for example? What’s the cutoff point for your own effort?

This guide can provide you with further information on inventory and production pricing through the cost of goods formula (COGS).

When determining and managing your business startup costs, you are going to want to spend some time making sure these routine costs are accounted for.

Taxes are another item that will vary from business to business, and the nature of online business often makes it trickier. You do not want to deal with a tax bill you never anticipated nor budgeted for. You might need to deal with several different levels of taxes, depending on how and where you operate.

• As an individual, you should learn more about self-employment taxes .
• You will need to pay taxes quarterly.
• You will need to pay taxes on any profits your business generates.
• You will likely need to pay payroll taxes , unemployment taxes , and workers’ compensation taxes (this varies depending on your country or region).

You will also either want to consult a tax professional or review the regulations in your area via the website of your state’s department of revenue.

Processing Fees

These can add up to cost you 1-2% of your revenue if you’re not careful. If depends partially on the deal you have going with your payment processor. PayPal often takes a cut ($0.30 USD, plus 2.9% of the amount you receive (more on Paypal fees here ), and credit card processing ( can range from very low to 3%+ depending on your agreement) will be the most common culprit. Also, beware of banking fees.

Licenses and Permits

While we won’t go into too much detail here (there are too many options, and it would be wise to look this up if applicable on your own), we do, however, want to remind you to budget for appropriate licensure and permits in your industry. This is more likely to apply to food service industries, construction industries, and some financial service industries. This guide from Fundera  is a great resource to work from to learn more. You should also look at local (city and town) regulations that might pertain to your industry.

Most businesses are not profitable at first, and it could take quite a while to break through and earn a steady stream of income. While the costs of an online business aren’t exorbitant as they might be for more traditional businesses, they can still be a drain, especially if you’re also working on it full time and have no other sources of income. You do not want to make business decisions based on short-term personal financial needs.

When starting out, you need to make sure you either have a reliable stream of income or enough in the bank to keep full operating costs going for at least one year and up to three years, if you think your platform or idea might take a while to take off. This guide will break down the different types of routes to funding a startup. This amount can vary greatly depending on your industry, so do some extra research beforehand and know how much you should have stored away.

Your budget should, at the end of the day, be one of the guiding documents of your business, alongside its mission statement and business plan. You can organize it how you would like. Just remember that businesses that don’t keep the details in mind generally aren’t as efficient as businesses that do. As for how to set it up, follow these steps:

• Make an itemized list of every expense or potential expense associated with your business.
• Plan out each item over the quarter as well as the year, as best as you are able.
• Set up a system where you can easily and nearly automatically update it each day or week with any new expenses, etc.
• At the end of each quarter, review your budget and adjust it as necessary. Be OK with the unexpected occurring and the numbers not perhaps being what you expected, but take the new data into consideration when making adjustments.

While there are further details, those are the basic steps. You can either use a program such as Float  or Freshbooks  to help you, or you can use a spreadsheet (and there are templates to help, you can download plenty from Microsoft  alone for Excel).

No two budgets should ever look the same, but here are a few additional things you should consider when setting up your budget for business startup costs:

• Have an emergency fund outside of your backup fund ready. If you have the resources to deal with it, it’s less of an emergency and more of an inconvenience. Try to have at least three months of expenditures on hand for an emergency, or more if you know something particularly expensive could happen such as upcoming car repairs.
• Try to keep a simplified budget handy that you can check at a glance, so you can refer to it as you make decisions.
• A budget is at times an evolving document. The budget should reflect reality as best as possible, and sometimes that requires changes to be made.
• Track everything. There is no expense too small. There are apps and programs to help with this if you think it will be too much of a chore (and those feels are justified). Some of these are Mint , Moneybook , and QuickBooks .

Managing Your Business Startup Costs

We encourage you to bookmark this page so you can check back for reference later. No one expects you to understand everything all at once and this can serve as a great business startup costs list.

Remember that your labor and energy are important things to consider when establishing how much it cost to start a business. Be aware of service and recurring costs, hidden opportunity costs, and similar items. Keep all of your options available to you, and don’t forget that managing costs effectively doesn’t always mean cutting corners. Above all else, be open to new opportunities and adapting to the market.

You shouldn’t have to start your business alone. Explore our free training series for frameworks at every stage of your entrepreneurial journey.

About Kevin Conner

Kevin Conner is the founder and CEO of Vast Bridges, a customer acquisition and lead generation company in the home services arena. Kevin has contributed to outlets such as Startup Stockpile , AgilityPR and more. Kevin Conner and Vast Bridges have been featured in Inc and the Jacksonville Business Journal .

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5 easy steps to determine your startup costs

Launch your business on solid financial ground and plan ahead for unexpected issues by calculating your startup expenses with this five-step guide. Presented by Chase for Business .

When you’re planning to launch a business, it’s easy to get lost in the numbers. Getting a clear picture of how much startup money you will need is essential to help avoid cash-flow  problems until your business starts turning a profit.

When you have a handle on your expenses, you can get the funding you need , plan for business growth and much more. Find out how to calculate startup costs for your small business in five steps.

Why do I need to know my startup costs?

Calculating your startup costs gives you more than just peace of mind. Knowing how much money you need to get started can help you:

• Write your business plan. Every startup needs a business plan that includes a complete list of expenses. The financial portion of your business plan should include both costs and assets. From there, you can calculate whether you need funding and when you’ll make a profit.
• Plan for growth. Once you map out your finances, you can create a strategy for business growth. Knowing your costs is essential for determining when you can afford to develop new products, hire a bigger team or open a new location.
• Apply for funding. Whether you want to set up a line of credit or get a Small Business Administration (SBA) loan, most lenders will ask about your costs. With your list of expenses and assets, you can clearly show why you need to apply for funding .
• Seek out investors. If you’re aiming to partner with investors or venture capital (VC) firms, you need detailed financial data. Investors often ask to see your startup costs and expenses to calculate how soon they can make their money back.

How to calculate startup costs

Adding up the costs to launch a small business takes both research and math. Follow these five steps to assess your startup expenses.

1. Identify your expenses

Start by writing down the startup costs you’ve already incurred — but don’t stop there. Research the expenses you’re likely to come across as your company gets closer to launching. Think about these standard startup costs:

• Business registration fees:  Unless you’re a sole proprietor , you need to register your business with the state. Most startups have to choose a business structure and file paperwork with the Secretary of State.
• Business licenses:  Many states require certain types of businesses to be licensed. For example, you might need to pay for a license if you broadcast online or on TV, or if you care for children or pets.
• Equipment:  Most businesses need some type of equipment to manufacture products or handle everyday tasks. Add up your company’s expenses for items like computers, smartphones, vehicles and production systems.
• Supplies:  Most businesses also buy necessities ranging from pens and paper clips to printer paper and cartridges.
• Consultants:  Account for the fees you might be paying another company to provide advice or help develop a strategy. Other examples include working with a management analyst or a recruiting expert.
• Payroll:  This amount should include what you pay your employees and your management team as well as yourself.
• Insurance:  Calculate both health insurance costs and any business insurance you need.
• Office:  Whether you rent office space or pay for a warehouse, note these costs.
• Inventory:  If your business sells products, account for the cost of keeping inventory in stock.
• Marketing:  Project your potential costs for marketing your business. Yours might include social media management, partnering with influencers or advertising through traditional channels like radio, print or TV.
• Website:  Remember to account for the cost of developing and maintaining your website as well as for creating content for it.
• Taxes:  Every business pays income tax. Depending on your business, you may also pay sales tax or payroll tax.
• Accountant:  Businesses of all sizes often depend on accountants to balance the financial books, prepare tax returns and produce reports.
• Legal:  Factor in the fees you pay an attorney to write contracts or to help you comply with industry regulations.

2. Estimate your costs

Once you’ve developed a list of your business needs, note the average cost for each category.

Check with the government offices in your state to determine business registration and license fees. To estimate the costs for equipment and supplies, you can shop online or request a quote from a vendor.

For other standard costs, you might choose to set aside a percentage of your total budget. For example, many startups budget up to 10% for marketing and at least 20% for business taxes.

3. Do the math

After estimating your costs, divide the list into one-time and ongoing expenses. Make sure all ongoing expenses reflect a monthly average. Add up your one-time expenses and multiply your ongoing expenses by the number of months until you launch.

The total represents your estimated startup expenses. For example, your list might look like this:

One-time expenses

• Business registration fees
• Business licenses

Ongoing expenses

• Consultants

4. Add a cushion

Even with a business plan in place, your startup could experience delays and setbacks. Make sure you have enough funds to keep your startup afloat by giving your expenses an extra cushion. Consider budgeting enough to sustain your business for up to 12 months beyond the target launch date.

5. Put the numbers to work

Finally, run your calculations. Factor in fixed and variable costs to help establish a pricing structure for your products and services. Include your startup costs in your business plan to help estimate when your company will become profitable. You can also use your expense sheet to see what kind of financing options are available  for you from banks, investors and VC firms.

Start your business on solid footing

Launching a business requires you to follow a disciplined path with countless twists and turns. You can increase your chances of winning the game of startup by taking the time to calculate your costs and manage your business expenses. 

Meet with your local business banker  to see how opening a business bank account  can help you get started on the right foot.

What to read next

Grow your business business funding.

Funding helps business owners get to where they want to go. There are many options, and each comes with its own terms and challenges. Getting familiar with the top funding types can be your first step toward making the right choice for your business.

MANAGE YOUR BUSINESS 7 ways to fund your business without a loan

You may have more options than you realize for getting the money you need.

GROW YOUR BUSINESS What is crowdfunding, and does your business need it?

Discover how your business can use crowdfunding to finance new products or services, attract more customers and gain valuable feedback.

START YOUR BUSINESS 5 things to look for in a business credit card

Learn the benefits of business credit cards and what options to weigh before choosing.

Lean Business Planning

Get what you want from your business.

New Business Starting Costs

Startups should estimate the new business startup costs as part of their lean business plan. “

How much will it cost to start that business? Here’s how to create a useful educated guess. It’s essential two lists. You can do this. Tweet

Two lists: expenses and assets

Knowing the starting costs before you start a business is a matter of two simple lists:

• Startup expenses : These are expenses that happen before the beginning of the plan, before the first month of operations. For example, many new companies incur expenses for legal work, logo design, brochures, site selection and improvements, and signage. If there is a business location, then normally the startup pays rent for a month or more before opening. And if employees start receiving compensation before the opening, then those disbursements are also startup expenses.
• Startup assets : Typical startup assets are cash (the money in the bank when the company starts), business or plant equipment, office furniture, vehicles, and starting inventory for stores or manufacturers.

“I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.” — Jeff Bezos, founder of Amazon.com Tweet

A Simple Starting Costs Example

I used an example in Starting Balances  in Chapter 18, on the Balance Sheet. These are estimated starting costs for the sample bicycle store:

Notice that on the same worksheet Garrett used to estimate starting costs, he also estimated starting funding, on the right side of the illustration. Books have to balance, so the initial estimates need to include not just the money you spend, but also where it comes from. In the case above, Garrett had to find $124,500, and you can see that he financed it with Accounts Payable, debt, and investment in various categories. That Starting Balances illustration in the Projected Balance Sheet chapter also shows how those initial balances go into the Projected Balance Sheet .

Another Simple Starting Costs Example

Here is another simple example: the starting costs worksheet that Magda developed for the restaurant I used in Chapter 7 for basic numbers. Magda’s list includes rent and payroll, the same as in her monthly spending, but here they are included in starting costs because these expenses happen before the launch.

I included rent and payroll because they point out the importance in timing. The difference between these as startup expenses and running expenses is timing, and nothing else. Magda could have chosen to plan startup expenses as a running worksheet on expenses, starting a few months before launch, as in the illustration below. I prefer the separate lists, because I like the way the two lists create an estimate of starting costs. But that’s an option.

How to Estimate Starting Costs

Obviously the goal with starting costs isn’t just to track them, but to estimate them ahead of time so you have a better idea, before you start a new business, of what the financial costs might be. Breaking the items down into a practical list makes the educated guess a lot easier. Ideally, you know the business you want to start, you are already familiar with the industry, so you can do a useful estimate for most of the startup costs from your own experience. If you don’t have enough firsthand knowledge, then you should be talking to people who do. For others, such as insurance, legal costs, or graphic design for logos, call some providers or brokers, and talk to partners; educate those guesses.

Starting Cash is the Hardest and Most Important

How much cash do you need in the bank, as you launch? That’s usually the toughest starting cost question. It’s also prone to misinformation, such as those alleged rules of thumb you can find everywhere, saying you need to have a year’s worth of expenses, or six months’ worth, before you start. It’s not that simple. For most businesses, the startup cash isn’t a matter of what’s ideal, or what some expert says is the rule of thumb – it’s how much money you have, can get, and are willing to risk.

The best way is to do a Projected Cash Flow while leaving the supposed starting cash balance at zero, which shows how much (at least in theory, according to assumptions) the startup really needs in cash to support the business as it grows, before it reaches a monthly cash flow break-even point. Magda did that to determine the $12,000 needed as starting cash for her restaurant. Note how, in the illustration here, the lowest point in cash is slightly less than $12,000:

That low point comes, theoretically, in the third month of the business, March. The low point is $11,609. Obviously that’s just an educated guess, but it’s based on assumptions for sales forecast, expense budget, and important cash flow factors including sales on account and purchasing inventory. So it’s better than a stab in the dark, or some rule of thumb.

Just as an example, the total spending with the estimates shown here, the theoretical “year’s worth of spending,” is $182,000 (which you don’t see on the illustration, by the way, but take my word for it). The total for the first six months is $93,000. If Magda sticks to those old formulas, she can’t start the business. She is able to raise enough money, between loans and her savings, to put $12,000 into the starting cash balance. So that’s what she does. Then she launches and continues to have her monthly reviews, and watch the performance of all key indicators very carefully.

Find Your Startup Costs Sweet Spot

There is no magic startup costs estimate for a given business. Every startup has its own natural level of startup costs. It’s built into the circumstances, like strategy, location, and resources. Call it the natural startup level; or maybe the sweet spot.

1. The Plan

For example, in the illustrations above, Magda’s restaurant deli in the office park needs about $60,000, and Garrett’s bicycle store needs about $125,000. The level is determined by factors like strategy, scope, founders’ objectives, location, and so forth. In both cases, the entrepreneurs have lists of assets they need and expenses they’ll incur. Let’s call these lists the natural startup level, which is built into the nature of the business, something like DNA. 

Startup cost estimates have three parts: a list of expenses, a list of assets needed, and an initial cash number calculated to cover the company through the early months when most startups are still too young to generate sufficient revenue to cover their monthly costs.

It’s not just a matter of industry type or best practices; strategy, resources, and location make huge differences. The fact that it’s a Vietnamese restaurant or a graphic arts business or a retail shoe store doesn’t determine the natural startup level, by itself. A lot depends on where, by whom, with what strategy, and what resources.

While we don’t know it for sure ever — because even after we count the actual costs, we can always second-guess our actual spending — I do believe we can understand something like natural levels, related to the nature of the specific startup.

Marketing strategy, for example, might make a huge difference. The company planning to buy Web traffic will naturally spend much more in its early months than the company planning to depend on viral word of mouth. It’s in the plan.

So too with location, product development strategy, management team and compensation, lots of different factors. They’re all in the plan. They result in our natural startup level.

2. Funding or Not Funding

There’s an obvious relationship between the amount of money needed and whether or not there’s funding, and where and how you seek that funding. It’s not random, it’s related to the plan itself. Here again is the idea of a natural level, of a fit between the nature of the business startup, and its funding strategy.

It seems that you start with your own resources, and if that’s enough, you stop there too. You look at what you can borrow. And you deal with realities of friends and family (limited for most people), angel investment (for more money, but also limited by realities of investor needs, payoffs, etc.), and venture capital (available for only a few very high-end plans, with good teams, defensible markets, scalability, etc.).

3. Launch or Revise

Somewhere in this process is a sense of scale and reality. If the natural startup cost is $2 million but you don’t have a proven team and a strong plan, then you don’t just raise less money, and you don’t just make do with less. No — and this is important — at that point, you have to revise your plan. You don’t just go blindly on spending money (and probably dumping it down the drain) if the money raised, or the money raisable, doesn’t match the amount the plan requires.

Revise the plan. Lower your sites. Narrow your market. Slow your projected growth rate.

Bring in a stronger team. New partners? More experienced people? Maybe a different ownership structure will help.

What’s really important is you have to jump out of a flawed assumption set and revise the plan. I’ve seen this too often: people do the plan, set the amounts, fail the funding, and then just keep going, but without the needed funding.

And that’s just not likely to work. More important, it is likely to cause you to fail and lose money.

Repetition for emphasis: you revise the plan to give it a different natural need level. You don’t just make do with less. You also do less. Otherwise, it’s not realistic.

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From Idea to Foundation

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Learn from the business planning experts, resources to help you get ahead, startup & operational costs, table of contents, introduction.

Data from reputable organizations like the U.S. Chamber of Commerce and Kaufman Foundation reveal a sobering truth: a significant number of businesses falter and fail within their first few years. One of the critical reasons behind this high failure rate is an inadequate understanding of startup and operating costs. Businesses often stumble due to undercapitalization, inefficient budgeting, and unrealistic financial planning, directly linked to a lack of comprehensive startup and operational cost analysis.

By offering a detailed exploration of startup and operating costs, we aim to equip you with the knowledge and tools necessary for accurate financial assessment and planning. This step is about fostering a deep understanding of the financial framework your business operates within. 

With this comprehensive guide, you’ll gain the insight needed to make informed decisions, set realistic budgets, and price your products or services appropriately. Ultimately, this understanding can be the difference between a business that merely survives and one that thrives. As we move forward on this detailed roadmap, prepare to arm yourself with knowledge that will crucially impact the longevity and success of your venture.

Pro Tip: 

Review ‘Operations in Detail’: If you haven’t thoroughly examined the ‘Operations in Detail’ step or need a refresher, it’s essential to revisit this step. Understanding the operational aspects of your business is critical before you can accurately assess the financial implications.

Understanding Costs

Challenges in startup finance.

Navigating the financial aspects of starting a business is a complex task, often riddled with challenges that can significantly impact the success and sustainability of the venture. In this step, we address some of the most common financial hurdles entrepreneurs face and provide guidance on how to overcome them.

Key Takeaways: Financial Hurdles

• Undercapitalization: Many startups underestimate the capital required to launch and sustain their business until it becomes profitable. This oversight can lead to a cash flow crisis, with the business running out of money prematurely.
• Inadequate Budgeting: A clear understanding of cost structures and operating expenses is vital. Without it, creating an accurate budget is challenging, often leading to over or underspending in critical areas.
• Pricing Issues: Properly setting prices for products or services is crucial. Misjudging costs can result in uncompetitive pricing or, worse, selling at a loss.
• Poor Financial Planning: Comprehensive knowledge of startup and operating costs is essential for realistic financial projections, crucial for effective decision-making and strategic planning.
• Difficulty in Securing Funding: Detailed financial plans and cost analyses are typically required by investors and lenders. Inability to provide this information can make securing necessary funding challenging or, more likely, impossible.
• Operational Inefficiencies: Without a clear grasp of operating costs, identifying areas for cost reduction or efficiency improvements can be difficult, leading to wasteful practices.
• Risk of Business Failure: Ultimately, a lack of understanding of the full financial picture significantly raises the risk of business failure, particularly in the crucial early stages of operation.

Categories of Startup Costs

Your startup costs is the capital you spend before you open your doors to customers and can be broadly categorized into assets, expenses, and working capital, each with its own set of subcategories. It’s crucial to consider various aspects like lease vs. buy decisions, supply ordering strategies, and staffing choices. The following gives an overview of of startup assets, expenses, and working capital: 

Startup assets for a pre-revenue startup are the tangible and intangible resources acquired to create a foundation for the business’s operations and growth. These assets include physical items like equipment and inventory, as well as intellectual properties and digital assets, which provide long-term value and contribute to the startup’s capability, unlike startup expenses that are consumed or depleted through the initial setup. Subcategories for startup assets often include: 

Tangible Assets

• Real Estate: Land and buildings.
• Equipment: Machinery, computers, office equipment.
• Vehicles: Cars, trucks, or vans used for business purposes.
• Furniture and Fixtures: Desks, chairs, lighting, shelving.
• Inventory: Stock of products for sale.
• Equipment: Computers, tablets, servers, displays, phones, printers.
• Safety and Security Equipment: Surveillance cameras, alarms.

Intangible Assets

• Brand and Intellectual Property: Trademarks, patents, copyrights.
• Software and Technology: Custom software, tech tools, digital assets.
• Goodwill: Value attributed to acquiring a brand, its reputation, and its customer relationships.
• Non-Standard Licenses and Permits: Specific industry-related licenses where the license has a value if the business was sold (e.g., liquor license, cannabis license).

Other Assets

• Refundable Deposits: Security deposits for utilities or rent.

Expenses:  

Startup expenses for a pre-revenue startup are the initial outlays necessary to establish and prepare the business for operation, including legal and administrative setup, securing a location, initial marketing, and workforce preparation. Unlike startup assets, which are tangible and intangible items of value the business owns, these expenses are one-time costs primarily aimed at setting up the business infrastructure and operational framework, without residual value or future liquidity. Examples of common startup expense subcategories include: 

Legal and Administrative Expenses

• Legal Fees: Costs for legal advice, company registration, incorporation, patents, and trademarks.
• Licenses and Permits: Fees for obtaining necessary legal permissions to operate.
• Business Planning: Expenses for developing business strategy, model, and plans.
• Consultancy Fees: Expenses for professional services like business consultants, accountants.

Location and Infrastructure Setup

• Broker Fees: Initial payments and fees for securing a business location.
• Utility Set-Up Fees: Initial fees for setting up essential utilities like electricity, water, and internet.

Insurance and Risk Management

• Insurance Deposits: Initial deposits for various business insurance policies.
• Business Insurance Premiums for First Term: Initial premium payments for business-related insurance policies.

Marketing and Branding

• Branding: Costs for creating brand identity, including logo design.
• Initial Marketing and Public Relations: Costs for establishing initial market presence and public relations efforts.
• Website Development : Expenses for website creation, hosting, and pre-launch maintenance.
• Advertising for Launch: Pre-launch marketing and promotional activities.

Human Resources

• Training Period Salaries and Wages: Compensation for employees during training before business operation begins.
• Pre-Launch Employee Recruitment and Training Costs: Expenses related to hiring and training the initial workforce.

Research and Development

• Market Research: Costs for analyzing market trends, customer preferences, and competition.
• Prototype Development: Costs associated with creating prototypes or initial service models.

Miscellaneous Preparation Costs

• Software and Subscriptions: Pre-operational expenses for business software and service subscriptions.
• Travel and Survey Expenses: Costs associated with market surveys, business location visits, and other pre-operating travel.

Working Capital:  

Working capital for a pre-revenue startup refers to the allocation of cash reserves to cover estimated monthly operating expenses (burn-rate components) and short-term liabilities, along with a buffer for contingencies. This capital is essential to support the startup’s operations through to the point of break-even or until it secures the next round of financing, such as moving from seed to Series A funding, with the amount and duration varying significantly based on the business type and strategy. Common examples of working capital allocations include: 

Cash Reserves

• Initial Funding: Seed capital or initial investment funds obtained through investors, personal savings, loans, or grants.
• Emergency Fund: Additional reserve funds to cover unforeseen expenses or delays in reaching revenue-generating stages.

Monthly Operating Expenses (Burn Rate Components)

• Salaries and Wages: Monthly payroll for employees, including founders and early staff.
• Office Rent and Utilities: Monthly costs for office space, electricity, internet, and other utilities.
• Software and Subscription Services: Regular expenses for essential software, cloud services, and subscriptions necessary for operation.
• Marketing and Advertising: Monthly costs for marketing activities to build brand presence and customer awareness.
• Insurance Premiums: Regular payments for necessary business insurance policies.
• Professional Services: Fees for legal, accounting, and consulting services.
• Research and Development: Ongoing costs for product development, testing, and improvement.

Short-Term Liabilities

• Accounts Payable: Short-term debts or obligations to vendors and service providers.
• Accrued Expenses: Incurred expenses that are recorded but not yet paid.

Buffer for Contingencies

• Contingency Buffer: An additional percentage of the total working capital estimated to cover unexpected costs or delays.

We have developed worksheets for hundreds of common Core Offerings to assist in brainstorming these costs. Download our Startup Cost Worksheet to get started.

Key to Building a Solid Foundation

Feeling overwhelmed.

If you find yourself overwhelmed at this step of estimating startup and operating costs, it might be a sign to revisit earlier steps of the Pre-Planning Process. A thorough and well-executed Business Model Development and Operations in Detail step can significantly ease the burden of this step.

• Revisit Business Model Development: Ensure you have a clear and comprehensive understanding of your business model. This step provides a blueprint that guides your financial planning.
• Review Operations in Detail: A detailed analysis of Key Activities, Key Resources, and Key Partners is crucial. If this step is thoroughly executed, estimating costs becomes a more straightforward research task.

Accurate Cost Analysis

Once you have identified the operational components, research becomes your primary tool. 

Practical Steps in Research:

• For HR costs, utilize platforms like salary.com and Indeed to understand local pay scales and employment benefits.
• Contact vendors and partners for quotes and cost structures.
• Utilize online resources for fixed costs like cloud storage, utilities, and office supplies.

Pre-Planning is a Discipline

• Importance of Granularity: This step demands granularity. Each cost, no matter how small, should be accounted for to build a realistic financial picture.
• Avoiding Premature Adaptations: Remember, this is the Pre-Planning phase. The goal here is not to adapt or make operational decisions based on things you cannot know but to create a solid foundation for your business plan or pitch. Changes and adaptations come later, once you start considering funding methods and adapting to sales, market, or operational realities.

By approaching this step with diligence and attention to detail, you lay the groundwork for a strong and realistic financial plan. This foundation is crucial not only for the initial launch but also for the long-term sustainability and success of your business.

Adjusting for Business Type and Stage

Understanding the distinction between traditional and innovative or new market business ventures is critical when planning startup costs. Each type demands a different approach and perspective on financial planning.

• Traditional Businesses: These are established business models with predictable patterns and well-understood markets. For example, a daycare center needs to consider costs for licensing, facility rental, child care supplies, and staff training. A legal firm has to budget for office space, legal databases, and professional staff. These businesses must think through all elements necessary to become fully operational from the start, aiming for rapid achievement of break-even status.
• Innovative or New Market Ventures: Contrasting with traditional models, these ventures often break new ground or create entirely new markets. For instance, a tech startup developing a unique app may initially focus on costs related to software development, securing intellectual property rights, and market testing. Their startup costs might be leaner if they concentrate on developing a minimum viable product (MVP) and reaching early adopters. The goal is often to demonstrate potential and secure further funding, following milestones like user growth or feature development.

Traditional businesses typically require a comprehensive, all-encompassing financial plan upfront. In contrast, innovative ventures may operate on a more performance-based approach, aligning their financial planning with specific milestones and funding stages like pre-seed or seed rounds.

Recognizing which category your business falls into and planning accordingly can significantly impact the efficiency and effectiveness of your financial strategy.

Tools and Resources for Startup and Operating Cost Attribution

Get your startup and operating cost worksheet.

Efficiently navigate the complexities of startup and operating costs with our comprehensive worksheet, designed to streamline your financial planning process. Available in both MS Excel and Google Sheets formats, this versatile tool offers a structured approach to categorize and calculate various costs.

Analyzing Operating Costs

Day-to-Day Business Expenses

Operating costs form a substantial part of any business’s financial structure. These are the recurring costs necessary for the day-to-day functioning of the business and can be broadly classified into fixed and variable expenses. Additionally, entrepreneurs must account for elements like depreciation, payroll taxes and benefits, and potential interest expenses.

Categorization of Operating Costs

• Fixed Expenses: These are costs that remain constant regardless of business performance, such as rent, salaries (to an extent), and insurance.
• Variable Expenses: Costs that fluctuate based on the level of business activity. Examples include utilities, raw material costs, and commission-based salaries.
• Additional Considerations: Depreciation of assets, payroll-related taxes and benefits, and interest expenses, which may become relevant in cases of debt financing.

Estimation: Implications and Accuracy

• Striving for Granularity: While it’s challenging to perfectly estimate operating costs, aiming for 85% accuracy can significantly reduce financial risks. Many business failures are linked to imprecise cost estimations, leading to the issues highlighted previously. If you aim to get a solid B+ here and have allocated a portion of your working capital for emergency funds and contingencies, you’ll be in a much better position to handle what actually happens in the market. 
• Importance of Detailed Planning: We provide worksheets based on common Core Offerings to assist in thinking through various Cost Structure categories. Access our Operating Cost Worksheets to facilitate thorough planning.

Strategies and Considerations

• Early-stage Cost Considerations: In the initial phases, certain expenses might be higher. For instance, hiring competent employees from the outset often means paying higher salaries. Similarly, ordering smaller quantities of supplies or products can result in higher per-unit costs.
• Industry Averages as Reference Points: While comparing costs with industry averages can be insightful, it’s important to remember that these may not always be applicable, especially for startups or innovative ventures where the cost dynamics can be quite different.

Special Note: Innovative or New Market Ventures:

• Lean Approach to Fixed and Variable Costs: These businesses often plan operating costs with a lean approach, focusing only on the essentials necessary to reach the next phase of development.
• Understanding Burn Rate Schedules: Particularly in pre-seed or seed rounds, understanding and managing the burn rate – the rate at which a company is spending its capital – is crucial. This schedule helps startups plan how long they can operate before needing additional funding, ensuring that they remain solvent while pursuing growth or development milestones.

A thorough and detailed approach to outlining operating costs not only lays a solid foundation for current operations but also prepares the business for future financial strategies and funding phases. This step is about outlining costs with precision and foresight, setting the stage for sustainable growth and successful funding endeavors.

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How Much Does a Business Plan Cost?

A complete business plan helps you to identify your business goals and how you plan on reaching them. Whether you are a new business owner or an experienced entrepreneur, writing a comprehensive business plan can help you start, grow, and/or attract investors to fund your business.  

How Much Does It Cost to Write a Business Plan ?

Business plan pricing depends on what route you take to create it. However, there are a few essential elements that are common to all business plans:

• Executive Summary
• Business Description
• Market Analysis
• Customer Analysis
• Competitive Analysis
• Marketing Strategy
• Operations Plan
• Management Team
• Financial Plan

There are several ways to approach writing a successful business plan, but the cost of each way varies widely. The cost of a business plan can be a significant investment, but it’s an essential tool for any business. Below we provide some tips for what to consider and the costs for the various methods of completing your own business plan.  

Considerations When Writing Your Own Business Plans

There are several things to consider when writing your own plan. Depending on whether you’re in need of funding and how much, the costs for your business plan will be different.

Take into account:

• How long will your business plan be?
• How many hours does it take to complete the business plan?
• What kind of language is used in the business plan?
• Who will use the business plan?
• Who will fund your business?
• How much are you looking to raise or if you need funding at all?

According to our business consultants’ surveys of investor requirements, a 15- to 25-page business plan is the ideal length. Adding more pages may cause your time-constrained investor to skim portions of the plan, even if they are interested, which might result in important information being overlooked. However, fewer pages may lead potential investors to believe that the firm has not been thoroughly thought out or simply doesn’t have enough information for them to make an investment decision.  

Business Plan Template Costs

There are a variety of business plan templates online that you can purchase for a one-time fee. These templates range in price but usually start at around $100. Remember, a bargain business plan template may not include all the information that you need, so it’s important to understand what is included with the template you purchase.

Many of these templates also come with instructions to help you fill in the template and make changes as needed. However, if there is something you want to be changed on the template, it may take time and money to have it done.

Be sure to do your research and find the right template for your business. The wrong template could set you back even further and change the face of your business entirely. If you purchase a professional business plan template, make sure it’s from a reputable business plan company with business plan writing skills   in a variety of industries.

The business plan template should be easily editable and customized for your specific business needs and industry trends.

If you do not want to pay for a template, there are companies that will charge by the page and some that offer free resources . However, these templates may not have been professional business plans written for your exact type of business.  

Experienced Consultants & Business Plan Writers Cost

Hiring a business plan writer or professional writing service will help you get a comprehensive business plan written just for your business. A professional business plan consultant will help you identify your goals and how your company will reach these goals. A business plan consultant fee usually costs more but can be worth it if you do not have the time or resources to complete the business plan yourself.

A business plan writer can be found through online directories, but be sure to do your research prior to engaging in business with them. Be sure to ask for references and read reviews before hiring a business plan writing service.

If you choose to hire a business plan consultant, the complexity and length of the plan will determine how much is a business plan. Generally, a consulting firm or private consultants charge between $1,000 and $5,000 to have a comprehensive business plan written . However, a lengthy and complex plan can easily start at a few thousand dollars and stretch into the tens of thousands of dollars based on the needs of the business.

Some experienced business plan writing services also offer package deals that include additional services, such as market research, a marketing plan, and realistic financial projections.

Business Plan Software Costs

There are business plan software applications that can be used for free or have a monthly subscription cost, which may work better for your needs depending on what you need in a business plan. These apps provide templates and make writing a business plan and business planning easier. They help organize the information you enter into the app and will sometimes offer advice on how to do things like financial projections for your business plan .

The information that you put into the application can be used for several different types of business plan needs. These apps are great for startups and small businesses looking to raise capital or secure funding.

Each app or software varies in what it offers. Some are more customizable than others, some have more options for presenting your business plan, and some even offer investment opportunities. With just your business idea, the business planning software can help you write your own business plan quickly and easily. 

Write Your Own Business Plan from Scratch

If you do not want to purchase a template or use software, the easiest and most cost-effective way is to write a business plan from scratch. This route takes time and effort to complete but can be done by anyone willing to put in the work.

When writing your business plan documents, remember that they should be as detailed as possible. This document is your guide to starting and running your business. The more complete it is, the better off you’ll be.

There are a variety of free resources available online to help you write a business plan, including articles, templates, and even video courses.

When writing a business plan from scratch, it’s important to consider all of your business aspects. This includes your business concept or business model , management, production, market research , sales strategies , customer service, operations, human resources, financial projections , and more.

Try to be as thorough as possible when writing the plan. While the task may seem daunting at first, you’ll find that putting together a business plan is not so bad once you get started. After all, if you can dream it, you can write it.

The cost of writing a b usiness plan is dependent on the purpose, type, and length of the business plan. The amount of time it takes to complete a  business plan , the language used, and who will be using the document also play a factor in the cost. You can find templates for a one-time fee or pay by the page, hire a business plan writing service or a business plan writer , contact a consulting firm , or use software/apps to create your business plan. Whichever option you choose, make sure you do your research, conduct an in-depth business plan review, and find the best resource to meet the goals for your business.  

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Calculate the start-up costs of your business

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Why you should calculate start-up costs

Create a start-up costs sheet, 1. research expenses, 2. understand your start-up costs, 3. calculate your start-up costs.

Your start-up costs are expenses before your business generates an income. There are many costs that come with setting up a business and different businesses have different setup costs. Understanding start-up costs can help you to plan ahead, seek finance and increase your chances of business success.

You can use our template to help calculate your business start-up costs.

Start-up costing template

Follow these steps to calculate your start-up costs.

Before you start your business, you should conduct market research on your potential industry. This will help you to make sure that your product or service will be profitable. You'll need to gather information on your market, potential customers and cost of production.

Your research will help you identify and plan for some of the costs to start your business, such as staff or marketing costs.

Learn how to research your market.

Your start-up costs will depend on the type of business you're starting, your business structure and the industry you're entering. Our template lists some expenses common to all business types, such as:

• supplies and equipment
• utility connections
• business name registration
• solicitor fees.

Start-up costs are your one-off costs associated with setting up a business.

Determine your running costs

It's a good idea to make sure you'll be able to cover 6 months’ worth of running costs up front when you start a business.

Running costs are the day-to-day expenses associated with operating your business. It's the amount of money you will regularly spend on things such as wages, rent and buying stock.

Once you have your list of expenses, enter the costs into the spreadsheet. It'll calculate your total costs for you.

If you’re using estimated costs, label them clearly and state whether your figures include or exclude goods and services tax (GST).

Start planning your business with our business planning template.

Learn how to seek finance., check out our guide to starting a business to learn about other steps., was this page helpful, thanks for sharing your feedback with us..

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Is Your Startup Struggling? You May Need to Rethink Your Budget.

Regardless of your industry, you can’t escape incidental expenses. Plan for them now, or run into financial roadblocks.

For businesses across all industries, small, often overlooked expenses can add up quickly.

If you look at these numbers in isolation, they might not seem like a big deal. Without proper scope and management, however, they’ll have a negative impact on your company’s financial health.

Even the U.S. Chamber of Commerce claims that entrepreneurs should add an extra 20 percent to their first-year budget to account for unexpected costs.

Understanding these costs and how they affect your budget is vital for maintaining control over your finances. Let’s explore incidental costs and how they can impact your business.

What Are Incidental Expenses?

An incidental expense is an extra cost that comes with doing business. It typically runs parallel to planned costs, but not always. For example, if you decide to take your team out for dinner, you probably have a budget for the meal, but if you don’t plan for the tip, it becomes an incidental expense.

In most cases, these costs are linked to travel and dining. But there are other instances where unexpected fees can catch you off guard, like needing to make an emergency run to the office supply store for printer ink.

More by This Author Should Your Budget Be Fixed or Flexible?

Common Types of Incidental Expenses

Let’s run through a list of some of the most common types of incidental expenses so you can better understand how and when these sneaky costs could show up. 

• Office expenses : If you’re buying notebooks, printer ink and coffee for the break room several times a week and not tracking it, you could be losing hundreds of dollars every month.
• Travel expenses : Business travel involves meals, Ubers, hotel stays and tips, which are all easy to underestimate. The cost of a week-long trip can get out of control if you don’t consider these costs.
• Maintenance and repairs : Unexpected maintenance and repairs are necessary to keep things running. If things break down, whether it’s an appliance like the breakroom refrigerator or something bigger, like a computer server , you need to fix it as soon as possible. This usually comes with a hefty price tag.
• Miscellaneous : Miscellaneous expenses will catch you off guard. For example, spontaneously taking a client out for dinner or buying a last-minute software upgrade can be unexpected costs. These expenses are hard to predict, so you need to have a buffer in your budget to account for them.

How Incidental Expenses Affect Your Budget

Now, let’s talk about some of the different ways incidental expenses can directly impact your business budget and long-term success.

Budget Gaps

Say a company budgets $500 per month for office supplies but ends up spending $700 because of frequent unplanned purchases. That’s a $200 gap between their budget and actual expenses.

If the company repeats this spending across multiple categories each month, that’s hundreds of dollars in extra costs every single month. These budget overruns make it hard to stay financially stable, especially for new business owners, and can force you to cut costs in ways you otherwise wouldn’t.

Cash Flow Problems

Your steady revenue may look good on paper, but if incidental expenses are constantly draining your cash reserves, you may fall into financial hardship. These cash flow problems can disrupt operations and damage relationships with suppliers and service providers.

Let’s say a small software development company underestimates the cost of frequent travel for client meetings. Although each trip seems relatively cheap, the cumulative effect of incidental costs can drain the company’s cash flow. This could force the company to delay important payments and even take short-term loans to cover daily expenses.

Profit Margin Reduction

The previous two effects boil down to one central idea: small expenses can and will eat away at your profit margins. Incidental costs, though small individually, collectively reduce the overall profitability of a business.

You might think you’ve been doing well, but it turns out your profits are actually 10 percent smaller each month in unplanned costs, and this adds up quickly. In 10 months, you’ll have lost a whole month of profits to expenses that you can’t quite pinpoint.

This is frustrating for startup founders who want to grow their businesses but can’t figure out why they’re not making any money.

Strategic Planning Disruption

When you’re losing a ton of money to incidental expenses, you can’t allocate funds for new products, research and development, marketing campaigns or business expansions. This can and will slow down your company’s growth.

For example, a tech company planning to launch a new product might find its budget being squeezed by unexpected expenses and have to delay or scale back the launch. Those disruptions impact not only current projects but also the company’s long-term goals and market positioning.

Managing incidental expenses is crucial for financial flexibility, which you need if you’re interested in scaling your business into new markets.

More on Entrepreneurial Finance This is Why Your Startup Needs Bookkeeping

How to Manage Incidental Expenses

Here are some actionable strategies you can use to reduce incidental expenses and take control over your finances.

Track and Monitor All Expenses

If you want to get a handle on hidden or unexpected costs, track and monitor them as soon as you see them. There are plenty of different expense tracking software that you can use to make this process quick and easy.

Spend time researching the various tools so you can find the right fit for your business. Investing in software like this will give you real-time visibility into spending so you can spot and address issues as they arise.

Budget for Incidental Expenses

By allocating a percentage of your budget to incidental costs, you can anticipate them without disrupting your financial plans. This keeps things stable when unexpected expenses arise.

For example, you could budget $100 for a tip when you take your team out to lunch. You might also consider allocating five to 10 percent of your monthly budget for unpredictable costs, so there’s always a reserve for emergency repairs or last-minute travel. This helps with day-to-day finances and gives you much-needed peace of mind.

Educate Employees

Establish and communicate clear policies and procedures to staff so they know what an incidental expense is and how to report it. Conduct training sessions to reinforce these guidelines and promote a culture of accountability and transparency.

For example, getting everyone together for a training session before an annual retreat ensures that employees understand the procedure, which will help with getting extra costs submitted in a timely manner through a mutual reimbursement form.

Provide easy-to-use reporting tools and clear guidelines so employees can manage their expenses responsibly and reduce untracked or incorrectly reported expenses. One of the easiest ways to do this is to send everyone a premade form, which they then send to human resources for processing.

Review and Adjust as Necessary

Regularly review and adjust your budget so you’re always prepared for unexpected or, in some cases, expected costs. Regular audits are also important to verify expenses are accurate and catch any mistakes early.

Use quarterly reviews to review spending, assess your buffer and make adjustments based on your current financial situation. This proactive approach will keep the budget aligned with the company’s financial goals and operational needs.

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What We Know About Kamala Harris’s $5 Trillion Tax Plan So Far

The vice president supports the tax increases proposed by the Biden White House, according to her campaign.

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By Andrew Duehren

Reporting from Washington

In a campaign otherwise light on policy specifics, Vice President Kamala Harris this week quietly rolled out her most detailed, far-ranging proposal yet: nearly $5 trillion in tax increases over a decade.

That’s how much more revenue the federal government would raise if it adopted a number of tax increases that President Biden proposed in the spring . Ms. Harris’s campaign said this week that she supported those tax hikes, which were thoroughly laid out in the most recent federal budget plan prepared by the Biden administration.

No one making less than $400,000 a year would see their taxes go up under the plan. Instead, Ms. Harris is seeking to significantly raise taxes on the wealthiest Americans and large corporations. Congress has previously rejected many of these tax ideas, even when Democrats controlled both chambers.

While tax policy is right now a subplot in a turbulent presidential campaign, it will be a primary policy issue in Washington next year. The next president will have to work with Congress to address the tax cuts Donald J. Trump signed into law in 2017. Many of those tax cuts expire after 2025, meaning millions of Americans will see their taxes go up if lawmakers don’t reach a deal next year.

Here’s an overview of what we now know — and still don’t know — about the Democratic nominee’s views on taxes.

Higher taxes on corporations

The most recent White House budget includes several proposals that would raise taxes on large corporations . Chief among them is raising the corporate tax rate to 28 percent from 21 percent, a step that the Treasury Department estimated could bring in $1.3 trillion in revenue over the next 10 years.

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Simple Business Plan Template (2024)

Updated: May 4, 2024, 4:37pm

Table of Contents

Why business plans are vital, get your free simple business plan template, how to write an effective business plan in 6 steps, frequently asked questions.

While taking many forms and serving many purposes, they all have one thing in common: business plans help you establish your goals and define the means for achieving them. Our simple business plan template covers everything you need to consider when launching a side gig, solo operation or small business. By following this step-by-step process, you might even uncover a few alternate routes to success.

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Whether you’re a first-time solopreneur or a seasoned business owner, the planning process challenges you to examine the costs and tasks involved in bringing a product or service to market. The process can also help you spot new income opportunities and hone in on the most profitable business models.

Though vital, business planning doesn’t have to be a chore. Business plans for lean startups and solopreneurs can simply outline the business concept, sales proposition, target customers and sketch out a plan of action to bring the product or service to market. However, if you’re seeking startup funding or partnership opportunities, you’ll need a write a business plan that details market research, operating costs and revenue forecasting. Whichever startup category you fall into, if you’re at square one, our simple business plan template will point you down the right path.

Copy our free simple business plan template so you can fill in the blanks as we explore each element of your business plan. Need help getting your ideas flowing? You’ll also find several startup scenario examples below.

Download free template as .docx

Whether you need a quick-launch overview or an in-depth plan for investors, any business plan should cover the six key elements outlined in our free template and explained below. The main difference in starting a small business versus an investor-funded business is the market research and operational and financial details needed to support the concept.

1. Your Mission or Vision

Start by declaring a “dream statement” for your business. You can call this your executive summary, vision statement or mission. Whatever the name, the first part of your business plan summarizes your idea by answering five questions. Keep it brief, such as an elevator pitch. You’ll expand these answers in the following sections of the simple business plan template.

• What does your business do? Are you selling products, services, information or a combination?
• Where does this happen? Will you conduct business online, in-store, via mobile means or in a specific location or environment?
• Who does your business benefit? Who is your target market and ideal customer for your concept?
• Why would potential customers care? What would make your ideal customers take notice of your business?
• How do your products and/or services outshine the competition? What would make your ideal customers choose you over a competitor?

These answers come easily if you have a solid concept for your business, but don’t worry if you get stuck. Use the rest of your plan template to brainstorm ideas and tactics. You’ll quickly find these answers and possibly new directions as you explore your ideas and options.

2. Offer and Value Proposition

This is where you detail your offer, such as selling products, providing services or both, and why anyone would care. That’s the value proposition. Specifically, you’ll expand on your answers to the first and fourth bullets from your mission/vision.

As you complete this section, you might find that exploring value propositions uncovers marketable business opportunities that you hadn’t yet considered. So spend some time brainstorming the possibilities in this section.

For example, a cottage baker startup specializing in gluten-free or keto-friendly products might be a value proposition that certain audiences care deeply about. Plus, you could expand on that value proposition by offering wedding and other special-occasion cakes that incorporate gluten-free, keto-friendly and traditional cake elements that all guests can enjoy.

3. Audience and Ideal Customer

Here is where you explore bullet point number three, who your business will benefit. Identifying your ideal customer and exploring a broader audience for your goods or services is essential in defining your sales and marketing strategies, plus it helps fine-tune what you offer.

There are many ways to research potential audiences, but a shortcut is to simply identify a problem that people have that your product or service can solve. If you start from the position of being a problem solver, it’s easy to define your audience and describe the wants and needs of your ideal customer for marketing efforts.

Using the cottage baker startup example, a problem people might have is finding fresh-baked gluten-free or keto-friendly sweets. Examining the wants and needs of these people might reveal a target audience that is health-conscious or possibly dealing with health issues and willing to spend more for hard-to-find items.

However, it’s essential to have a customer base that can support your business. You can be too specialized. For example, our baker startup can attract a broader audience and boost revenue by offering a wider selection of traditional baked goods alongside its gluten-free and keto-focused specialties.

4. Revenue Streams, Sales Channels and Marketing

Thanks to our internet-driven economy, startups have many revenue opportunities and can connect with target audiences through various channels. Revenue streams and sales channels also serve as marketing vehicles, so you can cover all three in this section.

Revenue Streams

Revenue streams are the many ways you can make money in your business. In your plan template, list how you’ll make money upon launch, plus include ideas for future expansion. The income possibilities just might surprise you.

For example, our cottage baker startup might consider these revenue streams:

• Product sales : Online, pop-up shops , wholesale and (future) in-store sales
• Affiliate income : Monetize blog and social media posts with affiliate links
• Advertising income : Reserve website space for advertising
• E-book sales : (future) Publish recipe e-books targeting gluten-free and keto-friendly dessert niches
• Video income : (future) Monetize a YouTube channel featuring how-to videos for the gluten-free and keto-friendly dessert niches
• Webinars and online classes : (future) Monetize coaching-style webinars and online classes covering specialty baking tips and techniques
• Members-only content : (future) Monetize a members-only section of the website for specialty content to complement webinars and online classes
• Franchise : (future) Monetize a specialty cottage bakery concept and sell to franchise entrepreneurs

Sales Channels

Sales channels put your revenue streams into action. This section also answers the “where will this happen” question in the second bullet of your vision.

The product sales channels for our cottage bakery example can include:

• Mobile point-of-sale (POS) : A mobile platform such as Shopify or Square POS for managing in-person sales at local farmers’ markets, fairs and festivals
• E-commerce platform : An online store such as Shopify, Square or WooCommerce for online retail sales and wholesale sales orders
• Social media channels : Facebook, Instagram and Pinterest shoppable posts and pins for online sales via social media channels
• Brick-and-mortar location : For in-store sales , once the business has grown to a point that it can support a physical location

Channels that support other income streams might include:

• Affiliate income : Blog section on the e-commerce website and affiliate partner accounts
• Advertising income : Reserved advertising spaces on the e-commerce website
• E-book sales : Amazon e-book sales via Amazon Kindle Direct Publishing
• Video income : YouTube channel with ad monetization
• Webinars and online classes : Online class and webinar platforms that support member accounts, recordings and playback
• Members-only content : Password-protected website content using membership apps such as MemberPress

Nowadays, the line between marketing and sales channels is blurred. Social media outlets, e-books, websites, blogs and videos serve as both marketing tools and income opportunities. Since most are free and those with advertising options are extremely economical, these are ideal marketing outlets for lean startups.

However, many businesses still find value in traditional advertising such as local radio, television, direct mail, newspapers and magazines. You can include these advertising costs in your simple business plan template to help build a marketing plan and budget.

5. Structure, Suppliers and Operations

This section of your simple business plan template explores how to structure and operate your business. Details include the type of business organization your startup will take, roles and responsibilities, supplier logistics and day-to-day operations. Also, include any certifications or permits needed to launch your enterprise in this section.

Our cottage baker example might use a structure and startup plan such as this:

• Business structure : Sole proprietorship with a “doing business as” (DBA) .
• Permits and certifications : County-issued food handling permit and state cottage food certification for home-based food production. Option, check into certified commercial kitchen rentals.
• Roles and responsibilities : Solopreneur, all roles and responsibilities with the owner.
• Supply chain : Bulk ingredients and food packaging via Sam’s Club, Costco, Amazon Prime with annual membership costs. Uline for shipping supplies; no membership needed.
• Day-to-day operations : Source ingredients and bake three days per week to fulfill local and online orders. Reserve time for specialty sales, wholesale partner orders and market events as needed. Ship online orders on alternating days. Update website and create marketing and affiliate blog posts on non-shipping days.

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6. Financial Forecasts

Your final task is to list forecasted business startup and ongoing costs and profit projections in your simple business plan template. Thanks to free business tools such as Square and free marketing on social media, lean startups can launch with few upfront costs. In many cases, cost of goods, shipping and packaging, business permits and printing for business cards are your only out-of-pocket expenses.

Cost Forecast

Our cottage baker’s forecasted lean startup costs might include:

Gross Profit Projections

This helps you determine the retail prices and sales volume required to keep your business running and, hopefully, earn income for yourself. Use product research to spot target retail prices for your goods, then subtract your cost of goods, such as hourly rate, raw goods and supplier costs. The total amount is your gross profit per item or service.

Here are some examples of projected gross profits for our cottage baker:

Bottom Line

Putting careful thought and detail in a business plan is always beneficial, but don’t get so bogged down in planning that you never hit the start button to launch your business . Also, remember that business plans aren’t set in stone. Markets, audiences and technologies change, and so will your goals and means of achieving them. Think of your business plan as a living document and regularly revisit, expand and restructure it as market opportunities and business growth demand.

Is there a template for a business plan?

You can copy our free business plan template and fill in the blanks or customize it in Google Docs, Microsoft Word or another word processing app. This free business plan template includes the six key elements that any entrepreneur needs to consider when launching a new business.

What does a simple business plan include?

A simple business plan is a one- to two-page overview covering six key elements that any budding entrepreneur needs to consider when launching a startup. These include your vision or mission, product or service offering, target audience, revenue streams and sales channels, structure and operations, and financial forecasts.

How can I create a free business plan template?

Start with our free business plan template that covers the six essential elements of a startup. Once downloaded, you can edit this document in Google Docs or another word processing app and add new sections or subsections to your plan template to meet your specific business plan needs.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Krista Fabregas is a seasoned eCommerce and online content pro sharing more than 20 years of hands-on know-how with those looking to launch and grow tech-forward businesses. Her expertise includes eCommerce startups and growth, SMB operations and logistics, website platforms, payment systems, side-gig and affiliate income, and multichannel marketing. Krista holds a bachelor's degree in English from The University of Texas at Austin and held senior positions at NASA, a Fortune 100 company, and several online startups.

Kamala Harris has an ambitious plan to build 3 million new homes. She'll have to get through Congress and local NIMBYs first.

• Kamala Harris unveiled a housing plan that includes building three million homes in four years.
• Her plan includes tax incentives for builders to construct small and affordable homes.
• Harris' supply-boosting policies could get the most traction among Republicans, but it'll be an uphill battle.

Democratic presidential nominee Kamala Harris unveiled some of her major economic priorities in a speech in North Carolina last week.

Central to her agenda is a plan to make housing more affordable — an issue that's become increasingly urgent for millions of Americans amid a housing supply shortage and skyrocketing prices . Part of Harris' plan involves spurring the construction of lots of new housing through policy changes and subsidies. But barriers to new construction abound — from an often-gridlocked Congress to state and local leaders and communities.

Harris has pledged to build three million homes across the country during her first term as president. She wants to offer tax incentives for home builders to construct starter homes — smaller, more affordable units — for first-time homebuyers. She would also expand a current tax credit for businesses that build affordable rental housing. And Harris says she would double the Biden administration's $20 billion housing innovation fund intended to support local governments and developers looking for new ways of building affordable housing. Last, the campaign called for a reduction in "red tape and needless bureaucracy" that stalls new construction.

These three million new homes would be in addition to the homes developers would otherwise construct, The Wall Street Journal reported .

Jenny Schuetz, an expert in urban economics and housing policy at the Brookings Institute, told Business Insider that while a goal for new home construction is helpful, it's not necessarily an accurate prediction.

"There's no way that the government can guarantee X number of homes are going to get built," Schuetz said. But, she added, "putting the number out there and then marking progress is actually quite helpful."

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Aside from incentivizing new housing construction, Harris' plan includes a proposal to crack down on investors buying up homes in bulk and landlords from using rent-setting algorithms "to collude with each other and jack up rents."

The campaign also proposed expanding the Biden administration's assistance for first-time homebuyers, proposing an average of $25,000 in downpayment support for first-time buyers.

A spokesperson for the Harris campaign didn't immediately respond to a request for comment.

Harris' plan focuses more on boosting the supply of housing than the current administration has. The federal government has traditionally focused its housing policy on demand-side subsidies like housing vouchers. Schuetz and other housing experts are glad to see this shift, noting that a housing shortage is the central cause of the affordability crisis.

There is some bipartisan agreement on housing policy. At the state level, Republican lawmakers have successfully cut red tape to spur home construction. But boosting federal funding and shifting strategies won't be easy in a bitterly divided Capitol.

"Acknowledging that this is a problem isn't the same thing as saying we've got a magic wand that will allow us to solve it," Schuetz said.

Barriers to action

Most of Harris' housing plan would require support — and lots of new funding — from Congress. The WSJ reported that the tax credits for starter homes and affordable housing construction would cost about $80 billion combined. And getting Congress to agree on anything is a serious challenge.

Andy Winkler, director of housing and infrastructure projects at the Bipartisan Policy Center, noted that while there isn't much Republican support for demand-side housing policies like Harris' downpayment assistance program, some of the supply-side measures could get bipartisan backing.

He's most optimistic that expanding the Low Income Housing Tax Credit and other supply-side, tax-based policies could pass Congress as it debates tax reform in 2025. But he's skeptical the reforms Harris could get through would result in three million new homes in four years — a goal he called "pretty ambitious."

"I have trouble foreseeing a sweep election, so if either the House or the Senate has a Republican majority, I think the tax policies are where you could see the most potential," Winkler said.

On top of getting Congress on board, a Harris administration would need states and municipalities to reform many layers of land-use regulations and other housing-related policies to make way for new construction. Many of the policies that restrict housing construction — including land-use laws like zoning — are controlled by local and state governments, meaning the federal government's influence over those policies is limited.

The White House and Congress can use federal subsidies to incentivize local officials to loosen regulations and otherwise spur construction, but they can't force this action. And there is often lots of local opposition that significantly slows down or halts all kinds of development.

While Republicans in Congress might be interested in cutting red tape at the local and state levels, the devil's in the details, Winkler said.

"It's really difficult from the federal level to incentivize those behaviors," he said.

Watch: Can Kamala Harris win over Democrats after Joe Biden drops out of 2024 presidential election?

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