The Cost of Starting a Business

The most commonly associated costs with starting a business are:

• LLC Formation or Incorporation fees - depending on your state this can usually range from $300-$800. In New York for example, you do have to pay to be published in a weekly publication 4 times and published in a daily publication 4 times.
• Capital Expenditures – Depending on your business this can vary significantly but definitely keep in mind equipment costs and any other capital you will require for your startup. If you’re going into a capital-intensive business this will probably be your biggest associated cost.
• Branding/Web Presence – Creating a website and all aspects of digital footprint and the foundation any digital marketing should be highly considered. Although some business may start on word of mouth, have a good sense of marketing will always help bring in new customers especially when you are just start out. Again, this can vary significantly depending on the type of business but it could have a high cost depending on what you do.
• Foundations for Customer Journey – This usually includes a CRM and how you manage clients (again this isn’t’ required for every business type) but the foundation for this can be quite expensive especially if you require a developer and are creating a custom solution.
• Miscellaneous consultations/legal fees - regarding the compliance and legal aspects of any business you need to be up to date on how you can legally operate your business. Some business requires licensing from the state in order to maintain while others don’t, it all depends on your industry.
• Inventory Expenses & Shipping Expenses
• Utilities, Rent, Phone systems costs, etc.
• Business Insurance
• Payroll – If you plan on have employees from the start

How Much Does It Cost to Start a Business?

Depending on the type of business, there is no set amount you need to startup. Some businesses can build a solid foundation with $5,000 - $10,000 while others will require at least a $100,000 investment initially. However, approximately 30% of small businesses start with $5,000 or less!

Unfortunately, most people either think the cost of starting a business is too significant or on the other end of the spectrum they heavily underestimate the associated cost. They’re both extreme viewpoints and no matter what your opinion is, there are always ways to save costs and lower you bottom line. Businesses aren’t built overnight and you won’t need everything upfront in order to get started. These sorts of things can be spread out during your startup period and taken in bite size chunks. You can also establish lines of credit depending on your line of business and consider getting a business credit card.

What Should Business Owners Prioritize?

Business owners should always prioritize costs that improve efficiency and get their product or service out the door as soon as possible. Many need to be aware of the consideration that they could potentially go from making money to spending money. This isn’t always the easiest change to make and be able to adapt to. This is why it’s important to cut costs where you can. Don’t waste time on vanity metrics associated with your business! These typically don’t add to your bottom line and usually end up becoming a bottomless money pit. It’s great to have a massive online following but let the following occur organically instead of trying to throw money at it as a solution.

Borrowing in Order to Establish the Business

If it’s possible, always try to start the business using your own funds and stay on budget. Although borrowing is unavoidable for some entrepreneurs and the route that some choose to take, if you can start the business all with your own funds and take everything step by step you’ll sleep better at night knowing that the business is yours and that you don’t owe anyone anything. Owing others can put added pressure, which can either be a good thing or a really bad thing.

Businesses related expenses have a way of creeping up on consumers out of nowhere. When you’re just starting out make sure you are focusing on your “core business”. All the other stuff is a lot less important during the early stages. If you don’t have a sound “core business” and a solid foundation, then things are a lot less likely to fall in place as they should. That foundation is what you’ll fall back when your experiments don’t work. If you can start slow, you’ll be all the better for it! If you have a side revenue stream that can supplement your startup expenses this is a great way to start off so you can start without getting into debt. Rome wasn’t built in a day and your business won’t be either. If you can maintain a long term viewpoint while balancing the short term, you’re much more likely to succeed as this is a large part of what being a business owner entails.