Is the cost of starting a business preventing you from launching your best idea?
This fear is common amongst aspiring small business owners; they want to start a company but are worried about all the startup costs.
Hi, my name is AJ! I recently sold my business for multiple seven figures. Now, I aim to help current and future business owners by answering all their pressing questions.
Although I had plenty of educational resources, I still made many costly mistakes when starting my business!
If you’re ready to learn about business startup costs so you can spend your money wisely, you’re in the right place!
I’m revealing everything you must know and more!
Key Takeaways
There are several businesses you can start for less than $1,000.
SaaS companies demand considerable startup capital.
Building your own website is an excellent way to save money when starting a business.
Related Reading: Best Small Business CRM
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Launching businesses costs between $5,000 and $40,000 (including first-year investments) on average.
Still, it’s possible to start a business with only $1,000 (I’ll dive into that later!).
So, how much does it cost to start a business? It really depends on the type of business.
For example, business startup costs vary based on these types of companies:
Product businessesService businessesSaaS businessesOnline businesses
Let’s look at these startup costs for each type of business in greater detail!
A product business costs between $40,000 and $100,000 to start (on average).
A product business is when a small business sells tangible goods to consumers.
Typically, this is a brick-and-mortar business with an online presence to compete with other product businesses.
Some examples of small businesses that are product businesses include the following:
Clothing departmentsFurniture StoresWater bottle companiesSpecialty office chair manufacturersSports equipment companies
The list of product businesses is endless!
Some of the startup expenses you can expect if you want to launch a product business include the following:
Marketing budget (to promote your products)Market research (to learn about your competition)Retail space (a physical location)Legal fees (incorporation fees, business paperwork, etc.)Prototype creation (to see what your product will look like in real life)Office SuppliesEquipment costs (if you’re setting up a warehouse)
Even after the business startup costs, you must be prepared for recurring expenses in the future, like payroll, building maintenance, and shipping costs.
Small business owners starting service companies expect to pay less than product-focused companies.
For instance, small business startup costs for service companies range from $1,000 to $50,000, depending on the product on your budget.
Starting a professional service small business under $2,000 is undoubtedly feasible!
Some examples of service businesses include the following ideas:
Athletic trainingHousekeepingMaintenance servicesGraphic designBusiness ConsultingFinancial AdvisingAcademic tutoringPool servicingHouse paintingMassage therapy/spa treatments
Small business owners spend money on the following expenses when they’re launching a service company:
Business LicenseBusiness registrationBusiness InsuranceHome service softwareEquipmentSuppliesDIY websiteBusiness cardCompany-brand uniform (if applicable)Marketing
SaaS stands for software as a service.
These companies create mobile apps or downloadable desktop software for users to enjoy.
Therefore, SaaS companies tend to be more pricey (between $15,000 and $100,000) because new business owners must create customized software.
Some kinds of SaaS businesses include the following:
Accounting softwareCustomer relationship management providersCommunication software (Slack, Zoom, Skype, etc.)Donation management software (Donorbox, GoFundMe, etc.)Social media management software (Buffer, Meta Business Suite, etc.)Digital document signing software
You can expect the following business expenses for SaaS companies:
Analytical toolsSecurity softwareBilling and payment softwareAccount management softwareCommunication softwareAPI integrationMarketing costs
Starting an online business is simpler than the other business types I’ve listed.
Still, don’t get it confused; online businesses demand considerable drive and attention if you want to run a successful business.
The average startup costs for online businesses range from $400 to $3,000.
Some online companies examples include the following:
Online blogWeb designerE-commerce retailersSEO consultant (any consulting business)YouTuberSocial media consultantDropshipping business ownerAffiliate marketerCopywriterRemote tech supportResume and cover letter writerVirtual Assistant
Some expenses associated with online companies include the following:
Business LicenseWeb hostingWeb designAn e-commerce platform (if necessary)Payment processing softwareMarketingPPC marketingWeb content creation
Every startup cost is different.
For instance, there are fixed, variable, and one-time expenses.
Below, I’ve compiled an easy-to-read comparison of the various startup costs you can expect!
One-time costs are just like they sound—expenses you only have to pay once.
Think of one-time expenses like buying a bicycle: you pay for it once, and then it’s yours to keep.
On the other hand, ongoing costs are like your paycheck: they happen regularly.
For example, if you buy a cell phone (a one-time cost), you’d still have to pay for the data plan every month (an ongoing cost).
Essential costs are like the money you need to buy lunch at school every day.
Without it, you won’t be able to eat.
In the business world, these upfront costs could include paying for the business license or buying the necessary equipment.
On the other hand, optional costs are like the money you use to buy ice cream from the cafeteria.
It’s nice to have, but you can still get by if you don’t have it one day.
In business, these could be costs for things like fancy business cards or a high-end website design, beneficial but not strictly necessary for the business to operate.
Fixed costs are like your monthly Netflix subscription.
No matter how many shows you watch, you must pay the same amount each month.
In a small business, fixed costs could be things like:
Rent for an office spaceSalaries for employeesPayments on small business loans
These costs don’t go up or down; they stay the same each month.
Variable costs, on the other hand, are like buying popcorn at the cinema.
The more movies you watch, the more popcorn you might buy.
In a business, variable costs could be things like materials for products.
The more products a company makes, the more materials they need to buy.
So, these costs can change depending on how much business a company is doing.
Below, I’ve created a list of standard business startup costs you must know about!
If you run your own business and don’t know what to expect, this list is what you need.
Part of your startup funding must go toward incorporation fees.
The expenses ensure you’re legally allowed to own and operate your business.
You can use a corporate lawyer to set up your business or file the paper yourself.
Product expenses vary based on how much inventory you demand initially.
Regardless, it’s essential to incorporate shipping and storage costs into your product inventory expense.
If you need a small business loan, it’s vital to know (roughly) how much your product inventory will cost.
Owning a business requires you to buy the necessary equipment.
The cost of this equipment will depend on the type of business entity you decide to open.
For instance, if your business is a cafe, you may need an espresso machine and coffee grinder.
An excellent, eye-catching website is a must in today’s digital world.
Therefore, regardless of your business structure, you must plan to create and maintain a website.
Also, websites ensure your website looks legitimate to new customers!
Getting insurance for your business protects you from paying for damages, accidents, and errors out of your own pocket.
Most businesses get general liability insurance.
However, property and auto insurance may be something your company could benefit from, too!
One BIG mistake I made while starting my first business was waiting to implement a CRM system.
What is a CRM? CRM software helps with several business aspects, including the following things:
Streamlines communications between employees and customersBoosts salesOrganizes important contact informationIt helps businesses understand more about their target audienceUses automation to streamline business tasks
Although CRM software can be pricey up front, it helps your company earn way more money in the long run!
Depending on your specific business, you may have to budget for a physical location for customers to view your products.
When figuring out the monthly costs of an office location, ensure you factor in utility costs as well!
Physical locations must be furnished to some extent.
You don’t have to go overboard while furnishing your retail space, but including the essentials helps your business look more professional.
Some kinds of furniture to consider having in your office space include:
ChairsDesksCabinetsShelvingTablesTVs
Depending on your business model, you might need help running your company!
Workers’ compensation can cost tens of thousands of dollars monthly.
Staffing and employee expenses vary based on the following factors:
The size of your teamEmployee skill and experience levelHow many hours employees workYour business location
Your business plan must include marketing and advertising expenses.
You have to get your business’s name and mission out there to the public, and advertising is how to do it!
Yes! It’s possible to start a business without money, although it will take patience, savviness, and grit!
Still, things like loans and finding no-cost business opportunities can help you attract customers and deal with the variable and fixed expenses later down the road.
Additional tips for starting a business without any money include doing the following things:
Sell handmade goods or digital assetsStart a dropshipping storeRun a print-on-demand store
While it is possible to start a business with no money, it’s vital to remember that eventually (as you grow), there will be some costs.
If you’re starting a business with your personal savings as your initial capital, you want to make every penny count.
Trust me, I get it! I was in the same boat not too long ago!
Here are some money-saving tips to help you start your business.
One more manageable way to save money while opening your first business is choosing an inexpensive location.
Many businesses strive to be downtown in busy city locations, but they come with higher rent and other costs.
You can always upgrade your equipment as your business grows.
Enjoy higher profit margins by investing in mid-tier equipment to do the job.
Hiring professional web designers and experienced employees right away can be tempting.
However, leaving unnecessary costs behind is a wise choice when building your business.
Service businesses allow you to build your company’s revenue without investing too much money.
Also, you don’t have as many unexpected costs with a service business.
Ensure your customers know how to get ahold of you!
Creating business cards is an excellent way to spread the word about your business while getting creative.
How much capital you need to start a business depends on the type of company you wish to open.
For example, some online stores and service businesses can open with as little as a $50 investment.
However, other businesses, like SaaS companies, demand up to $100,000 in capital to cover expenses.
Regardless of the amount of money you need in order to open your business, it’s helpful to know this early in the process.
Here is a step-by-step guide to starting your business with $1,000 or less!
Selling a service is an excellent way to save money and earn cash flow quickly.
You can sell numerous services because people are inclined to pay someone else to do the things they’d rather avoid!
Using Squarespace to build your first website is beneficial for several reasons.
First, Squarespace offers inexpensive plans that are perfect for first-time business owners.
Also, Squarespace provides numerous professional templates to help your company look professional, even if you’re new!
Buying a used or cheap laptop is an excellent way to save a TON of money!
Some new laptops can cost as much as $3,000!
However, used or refurbished models can save you some cash!
Another exceptional option is the Google Chromebook, which runs anywhere from $300 to $550.
Getting an LLC (limited liability corporation) by yourself might take a little more time than having a professional lawyer do it, but it’ll save you a lot of money.
Or, consider using services like Legal Zoom, which can get you an LLC for under $60 (depending on your location).
If you’re looking to save money while starting your first business, you must understand that you will have to do some tasks yourself!
The final step is using HubSopt’s free marketing and sales software!
These free tools include things like:
Email marketingFormsContact managementLanding pagesFacebook, Google, and LinkedIn adsTraffic and conversion analytics
It’s hard to believe HubSpot offers these tools for no monthly charge!
Therefore, taking advantage of these free tools while they’re available is crucial.
Not only will HubSpot help you save money, but it’ll help you get a leg up on your competition!
There you have it! Everything you need to know about starting your own business!
With any business, there will be some expenses. However, there are numerous ways to save money during the initial startup phase.
Doing things like building your website yourself and utilizing free tools from reputable companies will save you considerable money.
What type of small business are you starting? Let us know in the comments section below!
The post How Much Does It Cost to Start a Business in 2023? appeared first on Small Business Bonfire.
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