How Much Does It Cost To Start a Business?
Wondering how much it costs to start a business? Follow these tips to calculate your expenses and avoid cash shortfalls or vague financial plans. Knowing the types of costs to consider will also help you forecast profits and launch your business earlier!
Can I Start a Business With No Money?
Yes, you can start a business with no money. But expect to get different results than other businesses with funds.
A zero-capital business strategy also depends on your idea and niche. For example, selling pre-loved clothes will not cost you any money. However, selling e-learning services will require funds for specific content authoring tools and gadgets.
Other business ideas that do not require capital include blogging, becoming a life coach, podcasting, selling used items, and recycling products.
How Much Money on Average to Start a Business?
Startup and first-year expenses typically range from $30,000 to $40,000. But it’s possible to make an initial investment of at least $500 for a small yet promising venture.
Research shows that entrepreneurs with no employees spend an average of $18,000 in their first year. But those with one to four employees spend about $60,000.
Some unexpected costs to look out for in year first year include:
- Shipping fees.
- Legal fees.
- Taxes.
- Inventory and product.
It also helps to know the primary sources of funding for early-stage businesses.
- Personal savings.
- Reinvestments from previous sales.
- Financial support from friends and family.
- Personal loans
How to Know How Much You Need for a Business
Now let’s take a look at these three steps to calculating how much you need for your business.
Start Small
Just because you have $40,000 in your pocket doesn’t mean you’ll instantly spend it on your startup. Keep an open mind about issues that may arise in your first few months.
It also helps to have the right mindset before calculating. Think of this business as an idea without assuming it will be successful.
Estimate Your Expenses
Businesses have three types:
- Brick-and-mortar.
- Online.
- Service provider.
These three variations follow different budgets. For instance, an online business may not need office space during its initial years. However, it will require a budget for domain and online marketing.
Other expenses to consider when starting a business include:
- Office supplies.
- Communications.
- Licenses, permits, and insurance.
- Inventory.
- Lawyer and accountant fees.
- Employee salaries.
- Market research and advertising.
- Printed materials.
Understand Your Required Costs
Once you have estimated your expenses, it’s time to understand the types of costs to consider. Differentiating between them will help you manage your business’s cash flow.
- One-time and ongoing costs.
- Essential vs. optional charges.
- Fixed vs. variable costs.
It helps to project your cash flows for at least the first three months of your company. Add worst-case revenues, variable costs, and other possible expenses.
Plan Your Startup Costs Now
The key to success is preparation, especially when dealing with startup budgets. Calculating your future expenses also helps you estimate profits, secure loans quickly, and attract investors. Most of all, it saves you more money in the long run.
