How Much Money Do You Need to Start a Business? A Detailed Breakdown

By Julija A.

February 6, 2024

We’ve all fantasized about becoming our own boss at one point or another. But for most of us, the idea of having our own business is just that—an idea. We don’t act on it because we think we need too much money to get started. But how much money do you really need to start a business?

The truth is, you don’t need a ton of cash to start your own venture. In fact, many businesses can be created with very little up-front investment.

Of course, the amount of money you’ll need will depend on several factors, such as the type of company you want to start, the equipment and inventory you’ll need, and whether you plan to rent or purchase an office or retail space.

The Cost of Starting a Business

The first step in starting any business is to calculate the initial costs. These can range from a few hundred dollars to tens of thousands of dollars and are needed to get your business up and running.

First off, this figure depends on your idea and geographical region. Since these are different for every aspiring business owner, nobody can tell you exactly how much money you need to start a business. Therefore, we’ll do the next best thing and tell you how to determine your start-up costs.

To get an accurate estimate, you’ll need to consider everything from the cost of office supplies to the price of any necessary licenses or permits. Once you have a good handle on the basics you’ll need to cover, you can begin looking for ways to finance them.

Start-Up Costs for a Business

According to the US Small Business Administration, the estimated starting cost can be divided into two main categories: pre-start expenses and asset expenditures. On top of these, you’ve got to be able to cover all the ongoing costs your business will incur before it’s capable of standing firmly on its own. There are one-time costs, ongoing costs, necessary costs, optional costs, fixed costs, and variable costs.

  • Pre-Start Expenses are the one-time costs associated with getting your business off the ground, and they can range from legal fees to market research expenses.
  • Asset Expenditures represent the cost of any physical assets you’ll need for your business, such as office furniture or manufacturing equipment.
  • Ongoing costs represent rent, utilities, and employee salaries, which you’ll need to cover on a regular basis.
  • Fixed costs, such as rent or business loan payments, stay the same each month.
  • Variable costs, such as inventory or advertising expenses, can fluctuate monthly.
  • Essential costs, such as licenses and permits, are absolutely unavoidable when running a legitimate business.
  • Optional costs, such as consultants or workplace decorations, are not necessary but can be helpful.

These are all types of expenses to consider when starting your business. You’ll need to sit down, do meticulous research, and write an estimate of all the expenses and income you anticipate. To stay safe, plan for the worst-case scenario, but hope for the best.

Common Start-Up Expenses

Whether you are planning to start a bookkeeping business or a candle-making company, success doesn’t come cheap, especially in the beginning. Here is a list of outlays practically every venture needs to take care of:

  • Business licenses and permits
  • Office space or equipment rental
  • Inventory cost
  • Insurance
  • Advertising and marketing
  • Accounting and legal fees
  • Employee salaries
  • Utilities
  • Website design and hosting fees

Depending on your business, there may be other one-time or ongoing costs that you’ll need to consider. To get an accurate number, remember to factor in additional costs, such as inventory, shipping, marketing, and a fund for unforeseen expenses that may pop up along the way.

Ways To Finance Your Business

It’s encouraging to know that 58% of small firms began with less than $25,000 and one-third with less than $5,000. Once you’ve done your homework, you’ll know if you’re among them.

Once you know how much capital you need to start a business, it’s time to figure out how to finance it. It’s ideal if you can do it out of your own pocket, but that isn’t always possible. Depending on your situation, you may need to consider creative funding methods to turn your idea into reality.

  • Bootstrap: This means you’ll use personal savings to finance your company. This is a good option if you have a low-risk business that can be opened with little to no money.
  • Crowdfunding: With crowdfunding, you’ll solicit small amounts of money from a large group of people. This is a suitable choice if you have a brilliant company concept but don’t have the money to fund it. It used to be next to impossible to get funds in this manner, but today there are several excellent platforms devoted to crowdfunding that can help you quickly reach your objective.
  • Small-business loan: A small-business loan from a bank or credit union is the traditional source of funding for startups. However, this avenue will only be available if you have good credit and need a significant amount of money to get started. Some banks give small-business loans to people with bad credit, but their interest rate is substantially higher.
  • Friends and family: You may be able to cover business startup costs by asking your friends and family members to invest in your venture, either with interest or without. If you don’t want to take out a loan and trust the people you’re asking to support you, this is a fantastic choice.

The final three options are more appropriate when your business is already up and running, but you’re struggling to keep up with the costs or are looking to expand the scope of your operations.

  • Venture capitalists: If you have a high-growth business, you may be able to get funding from venture capitalists, who will finance your business with money pooled from third parties, such as investment companies or banks. If you need a lot of money and are ready to give up a portion of your company in exchange for cash, this is an excellent alternative.
  • Angel Investors: Angel investors are wealthy individuals who invest in businesses in exchange for equity, but unlike venture capitalists, they are using their own funds. As you can see, angel investors and venture capitalists are similar, but not exactly the same. The amounts you can get from angel investors are often smaller than those from venture capitalists, too.
  • Grants: You may be able to get funded by the government or other organizations. This is a good option if you have a low-income business or are working in a field that benefits the community.

No matter how you finance your startup business, it’s wise to plan for the worst-case scenario. Once you’ve done your research and secured funding for your idea, you’ll be all set to launch your new business… or are you?

How Do You Know If You’re Ready To Start a Business?

The thought of being in complete control of our work lives—and incomes!—is incredibly appealing. Luckily, it’s now more possible than ever to make that dream a reality.

But before you quit your day job, here are four things to think about before becoming your own boss:

1. Are you prepared to work hard—really hard?

Running your own business is not a 9-to-5 job. It’s more like a 24/7 job. You’ll have to put in extremely long hours to get your business off the ground, and even once it’s established, you’ll still need to work constantly to keep it afloat. So ask yourself—are you prepared to work hard?

2. Do you have what it takes to be a leader?

As the boss, you’ll be responsible for guiding and managing your team (if you have one). This means you’ll need to have strong leadership skills. Are you up for that challenge?

3. Can you handle the stress?

Running a company is stressful, and we’re not just talking about procuring the money needed to start and operate a business. Things won’t always go as planned, and you’ll have to constantly deal with challenges and setbacks. So ask yourself—can you handle the stress?

4. Are you prepared to take risks?

Starting a business is a risk. There’s no guarantee that you’ll be successful, no matter how well you plan or how talented you and your team may be. So ask yourself—are you prepared to take risks?

If your answer to all of these questions is “yes,” then you just might be ready to become your own boss. But remember, it’s not a decision to be made lightly. Be sure to do your research and plan carefully before taking the plunge.


Once you’ve done your research, created a detailed business plan, and factored in additional costs that may pop up along the way, you should know how much money you need to start a business. Remember that this is just a general guide, and your specific situation may require more or less capital.

So what are you waiting for? Get out there and make your dreams a reality! Who knows, you could be the next big success story on the cover of Forbes.


How much does it cost to start a business online?

There are no easy answers here, since the figure will vary based on the sort of business you operate, but online companies generally have lower overhead than a brick-and-mortar store. If you want to reduce your expenses further, you can use one of the numerous online platforms like Upwork to outsource tasks and spare yourself the cost of running a business with an in-house team.

Is money necessary to start and open a business?

It depends on the type of business you are trying to start. Most companies would need at least a license, but some businesses require no initial investment whatsoever.

What are the start-up expenses?

The most common startup expenses include business licenses and permits, office space or equipment rental, inventory cost, insurance, advertising and marketing, accounting and legal fees, employee salaries, utilities, and website design and hosting fees.

For additional information on start-up expenses, we recommend reading our “How much money do you need to start a business” article above, which covers the subject in great depth.

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