startup costs in business plan

How Much Does it Cost to Start a Business?

8 min. read

Updated April 25, 2024

What will it cost to start your business? This is a key question for anyone thinking about starting out on their own. You’ll want to spend some time figuring this out so you know how much money you need to raise and whether you can afford to get your business off the ground.

Most importantly, you’ll want to figure out how much cash you’re going to need in the bank to keep your business afloat as you grow your sales during the early days of your business. 

Typical startup costs can vary depending on whether you’re operating a  brick-and-mortar store, online store, or service operation . However, a common theme is that launching a successful business requires preparation.

And while you may not know exactly what those expenses will be, you can and should begin researching and estimating what it will cost to start your business.

• How to determine your startup costs

Like when developing your  business plan , or  forecasting  your initial sales, it’s a mixture of  market research ,  testing , and informed guessing. Looking at your competitors is a good starting point. Once you feel your initial estimates are in the ballpark, you can start to get more specific by making these three simple lists.

1. Startup expenses

These are expenses that happen before you launch and start bringing in any revenue. Here are some examples:

• Permits and Licenses: Every business needs a license to operate, just like a driver needs one to drive. Costs vary depending on industry and location.
• Legal Fees: Getting your business structure set up (sole proprietorship, LLC, etc.) might involve consulting a lawyer and at least will involve the basic business formation fees.
• Insurance: Accidents happen, and insurance protects your business from unforeseen bumps.
• Marketing and Branding: The ways to spread the word about your product or service. They could involve creating a website, creating business cards, or promoting social media.
• Office Supplies : Pens, paperclips, that all-important stapler – the essentials to keep your business humming.
• Rent/Lease: If you need to rent space for your business before you start selling, include those expenses in your list as well.

2. Startup assets

Next, calculate the total you need to spend on assets to get your business off the ground. Assets are larger purchases that have long-term value. They’re typically significant items that you could resell later if you needed or wanted to.

Here are a few examples:

• Equipment:  Think ovens for a bakery, cameras for a photography business, or computers for a tech startup.
• Inventory:  If you’re selling products, you’ll need to stock up before opening your doors (or your online store).
• Furniture and Decorations:  Desks, chairs, that comfy couch in the waiting room – creating a functional and inviting workspace might involve some upfront investment.
• Vehicles: If your business requires a vehicle to deliver your product or service, be sure to account for that purchase here.

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Why separate assets and expenses?

There’s a reason that you should separate costs into assets and expenses. Expenses are deductible against income, so they reduce taxable income. Assets, on the other hand, are not deductible against income.

By initially separating the two, you potentially save yourself money on taxes. Additionally, by accurately accounting for expenses, you can avoid overstating your assets on the balance sheet. While typically having more assets is a better look, having assets that are useless or unfounded only bloats your books and potentially makes them inaccurate. 

Listing these out separately is good practice when  starting a business  and leads into the final piece to consider when determining startup costs. 

3. Operating Expenses

Finally, figure out what it’s going to cost to keep your doors open until sales can cover expenses. Create a list that estimates monthly expenses, such as:

• Payroll (including your own salary)
• Marketing and advertising
• Loan payments
• Insurance premiums
• Office supplies
• Professional services
• Travel costs
• Shipping and distribution

Then, based on your revenue forecasts , calculate how many months it will take before your sales can cover all those monthly expenses. Multiply that number of months by your monthly operating expenses to determine how much you’re going to need to cover operating expenses as your business starts.

This number is often called “ cash runway ” and is a critical number – you need enough cash to fund those early red ink months. This number is how much cash you need to have in your checking account when you open your doors for business.

Calculating how much startup cash you need

To figure out how much money you need to start your business, add the asset purchases, startup expenses, and operating expenses over your cash runway period. This is your total startup costs, and it’s better to overestimate than underestimate these costs.

It often makes sense to invest the time to build a slightly more detailed starting costs calculation. Assuming you start making some sales and those sales grow over time, your revenue will be able to help pay for some of your operating expenses. Ideally, your sales contribute more and more over time until you become profitable.

To do a more detailed calculation, you’ll want to invest the time in a detailed financial forecast where you can experiment with different scenarios. If you do this, you’ll be able to see how much it will cost to start your business with different revenue growth rates. You’ll also be able to experiment with different funding scenarios and what your business would look like with different types of loans.

• Funding Starting Costs

You can cover starting costs on your own, or through a combination of loans and investments.

Many entrepreneurs decide they want to raise more cash than they need so they’ll have money left over for contingencies. While that makes good sense when you can do it, it is difficult to explain that to investors. Outside investors don’t want to give you more money than you need, because it’s their money.

You may see experts who recommend having anywhere from six months to a year’s worth of expenses covered, with your starting cash. That’s nice in concept and would be great for peace of mind, but it’s rarely practical. And it interferes with your estimates and dilutes their value.

Of course, startup financing isn’t technically part of the starting costs estimate. But in the real world, to get started, you need to estimate the starting costs and determine what startup financing will be necessary to cover them. The type of financing you pursue may alter your startup or ongoing costs in a given period, so it’s important to consider this upfront.

Here are common financing options to consider:

• Investment : What you or someone else puts into the company. It ends up as paid-in capital in the  balance sheet . This is the classic concept of business investment, taking ownership in a company, risking money in the hope of gaining money later.
• Accounts payable : Debts that are outstanding or need to be paid after a certain time according to your balance sheet. Generally, this means credit-card debt. This number becomes the starting balance of your balance sheet.
• Current borrowing : Standard debt, borrowing from banks,  Small Business Administration , or other current borrowing.
• Other current liabilities : Additional liabilities that don’t have interest charges. This is where you put loans from founders, family members, or friends. We aren’t recommending interest-free loans for financing, by the way, but when they happen, this is where they go.
• Long-term liabilities : Long-term debt or long-term loans.
• Other considerations for estimating startup costs

Pre-launch versus normal operations

With our definition of starting costs, the launch date is the defining point. Rent and payroll expenses before launch are considered startup expenses. The same expenses after launch are considered operating or ongoing expenses.

Many companies also incur some payroll expenses before launch because they need to hire people to train before launch, develop their website, stock shelves, and so forth.

Further Reading: How to calculate the hourly cost of an employee

The same defining point affects assets as well. For example, amounts in inventory purchased before launch and available at launch are included in starting assets. Inventory purchased after launch will affect  cash flow , and the balance sheet; but isn’t considered part of the starting costs.

So, be sure to accurately define the cutoff for startup costs and operating expenses. Again, by outlining everything within specific categories, this transition should be simple and easy to keep track of.

Your launch month will likely be the start of your business’s fiscal year

The establishment of a standard fiscal year plays a role in your analysis. U.S. tax code allows most businesses to manage taxes based on a fiscal year, which can be any series of 12 months, not necessarily January through December.

It can be convenient to establish the fiscal year as starting the same month that the business launches. In this case, the startup costs and startup funding match the fiscal year—and they happen in the time before the launch and beginning of the first operational fiscal year. The pre-launch transactions are reported as a separate tax year, even if they occur in just a few months, or even one month. So the last month of the pre-launch period is also the last month of the fiscal year.

• Aim for long-term success by estimating startup costs

Make sure you’ve considered every aspect of your business and included related costs. You’ll have a better chance at securing loans, attracting investors, estimating profits, and understanding the cash runway of your business.

The more accurately you layout startup costs and make adjustments as you incur them, the more accurate vision you’ll have for the immediate future of your business. 

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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How to Calculate Startup Costs for Small Businesses

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When you’re writing your business plan , you’ll need an accurate estimate of what it will cost for you to start your business so you can decide how to manage your funding and expenses.

Accurately estimating your startup costs can be tricky, but this guide will help you understand your initial costs and how you can plan for them.

First we’ll look at some of the most common startup expenses to get you started:

Common business expenses

The first step is to make a list of all the purchases you’ll need to make in order to start operating.

Categorize your list into expenses that are one-time purchases and those that will be ongoing payments, since both will factor into your calculations.

Here are some of the most common expenses in both categories:

One-time expenses

Necessary equipment like a cash registers, machinery, or vehicles

Incorporation fees

Permits and licenses, such as city, county, and state licensing, or those related to your specific industry

Computer or technology equipment

Down payment for your office or store

Initial business cards

Initial inventory

Initial office supplies

Technology, such as computers, tablets, or printers

Office or business furniture

Ongoing expenses

Business taxes

Your rent or mortgage payment

Accounting services

Legal services

Business insurance

Payroll and employee benefits

Your salary and benefits

Operating expenses, such as bags in retail

Office supplies, such as pens and paper

Website hosting and maintenance

Travel if your business will require it, including gas

Utilities like electric, gas, water, phone, and internet

Marketing materials

Ongoing inventory

Ongoing office supplies

Loan or credit payments

Next, you’ll also need to determine which of your ongoing expenses are fixed costs, and which are variable costs. Fixed expenses you can plan for exactly, but for variable expenses, your costs will change each time.

Here are some common expenses in each category:

Fixed expenses

Lease or mortgage

Administrative costs

Variable expenses

When planning for your startup, you need to only consider items that are essential in the beginning, rather than optional items you can invest in later when your business revenue can help offset the cost.

Don’t forget to research additional necessary expenses in your industry. Other professionals in your field or websites about your type of business can help you determine what is essential.

>> MORE: Best budgeting software for businesses

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.

How to calculate startup costs for your small business

Use your list from above to complete the next steps:

1. Research

After you’ve made a list of your expenses, it’s time to research. You’ll need to estimate the cost of each item on your list for an accurate estimate.

When researching, don’t forget to do some bargain hunting. You’ll want to minimize expenses as much as possible without sacrificing quality for big-ticket items. This will mean that your research will include equipment capabilities, reviews, maintenance costs, and warranties.

Your one-time expenses and fixed ongoing expenses should have specific costs you can estimate fairly accurately.

For variable ongoing expenses, you may have to do some extra research and make some broad guesses. For example, you won’t know what your ongoing inventory costs will be until you’re operational, but if you factor in a bit of cushion on these expenses, you can ensure you’ll have enough funding to cover these expenses.

2. Expense totals

You’ll need to total your one-time expenses, so that you know exactly what just opening the business will cost, but that isn’t all. You’ll also need to factor in several months’ worth of ongoing expenses.

While your business will be able to cover these expenses once it is operational, it may take time before it can generate enough sales to cover these costs, much less make a profit.

Generally speaking, it’s a smart idea to count on covering six-12 months of business expenses up front while your business is growing. While you can factor sales growth and business revenue into the payment for these costs to lessen the upfront burden, it’s generally safer to make calculations on the assumption that your business won’t be able to contribute, since you won’t be able to accurately forecast sales until you’re operational.

You may also find that some expenses will increase as your business grows, such as marketing, inventory, or payroll, so you’ll want to factor in some extra cushion for growing needs.

4. Total startup costs

Once you have all these figures, you can total your expenses to estimate your startup costs fairly accurately.

Yes, it’s probably a large number, especially if you plan to factor in a cushion for the first few months to a year of operation, but there are many funding options for new business owners.

Once your business begins operating or you begin making purchases for your business, you may find additional needs you left out of your estimates or that some expenses are lower than you planned. You’ll need to keep adjusting your plan as you learn more through the process of starting your business.

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

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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 .

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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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Business Startup Costs: The Ultimate Guide (2024)

September 14, 2022

More people are thinking about starting a business than ever before. In fact, nearly 5.4 million businesses were started in 2021, so how much does it cost to start a business?

The answer is different for every business, but many small business owners spend less than $5,000 on startup costs. We’ve talked to a ton of small business owners about how to start a business and we’re going to share what we’ve learned from them.

We’ll break down the business startup costs into upfront costs, one-time costs, and recurring expenses for each type of business. Let’s look at how we classified each type of cost.

Typical business startup costs

We’ve broken down the startup costs into fixed costs and variable costs. We’ll discuss each below.

Fixed Costs

Fixed costs are business costs that do not change as sales increase. The following items are common startup costs that are fixed costs:

• Office Space (Recurring) : This includes both rent and utilities. Most small business owners start with home office space and deduct the percentage of space from their taxes as a small business cost.
• Legal Fees (Upfront) : These are recurring costs that you have to pay to run a business legally, which usually include business formation, business licensing, and other professional fees to comply with regulations.
• Software Costs (Upfront and Ongoing) : These business startup costs include payment processors, websites, CRM, accounting software, and more. You can find some that would be one-time costs, but most are recurring charges.
• Equipment Costs (Upfront) : This includes machinery, vehicles, and other costs to meet the mission critical aspects of the business.
• Insurance Costs (Upfront and Ongoing) : If your business requires insurance, make sure to keep it continuous. If it doesn’t, you may want to consider it anyway.

As time goes on, some businesses may find that a few fixed costs only remain fixed up to a certain volume. After that, they might see a drastic increase to add more volume and then it will become a fixed cost again. Adding a second service truck is one of the typical costs that work like this.

The other type of small business startup costs are variable costs, which we’ll discuss next.

Variable Costs

There are business costs that vary based on the volume the business does. These startup costs are called variable costs. Common startup costs in this category include:

• Shipping Costs (Variable Expense): Shipping costs are included in variable costs because you only pay for them if you order materials or ship products to a customer.
• Marketing Costs (Ongoing Costs) : The Small Business Administration suggests spending approximately 8% of desired revenue on marketing. The advertising costs seem to be one of the defining factors as to whether a business succeeds long term.
• Material Costs (Varies): The time and materials that go into offering a product or service will affect your revenue.
• Supplies and Packaging Costs: Items you use for running the business must be considered early in the game. This startup cost may include computers, cleaning supplies, business cards, packaging for products, and other items that help your business.
• Wages: Most wages will vary with the amount of business you have. You have to pay employees for their time regardless, but you’ll schedule less hours when you have less business.
• Unexpected Costs: You should always leave a little wiggle room for unforeseen events. I’d suggest at least a 10% slush fund for unexpected startup costs and operating costs.
• Other Costs: This is a catch all for spending you can forecast, but are not sure which cost categories to include them in.

Now that you know the costs we’ll be analyzing, let’s look at the average start-up costs for businesses.

How much does it cost to start a business?

I broke down the average costs of starting a business into four different classifications:

• Low Cost: start a business with a shoestring budget and figure out the ongoing expenses along the way.
• Average Cost: start a business with the money to cover the first year of organizational expenses.
• High Cost: business owners interested in the startup costs to guarantee they stay in business for five years.
• Franchise: business owners who want to buy a franchise.

H ow much does it cost to start a small business?

According to the Small Business Administration , one out of every four businesses start with less than $5,000, and over half of small businesses have startup costs of under $25,000. But the median is just over $24,000, and the weighted average would be between $72,000 and $276,000. 

How much does it cost to start an online business?

Online businesses are normally some of the lowest in cost to start. You can start most of them for under $1,000 without any educational expenses.They require a computer, internet, business licensing, and some software. Businesses in this category might include:

• E-commerce stores
• Graphic design
• YouTube content creators
• Virtual assistants
• Marketing agencies
• Software developers

When people ask “how much does it cost to start a business online?” search results will normally provide answers about ecommerce stores. We’ll discuss those next.

How much does it cost to start a t-shirt business?

T-shirt companies are fairly easy to start. For example, you can start with a $30 Shopify, some design software, and a print-on-demand provider. If you really want to make money on it, you have to get good at SEO and marketing, which will increase your costs.

Check out our interview with the owner of Urbanity to learn more:

How much does it cost to start a landscaping business?

We’ve interviewed multiple business owners who have started landscaping companies. It’s one of the easiest types of businesses to start. You can even start a business for as little as $300. 

The table below shows the breakdown of the business expenses a small business owner should expect when starting a landscaping business.

Check out our most recent YouTube video with a small business owner who started Plan-It Vision with only $300:

How much does it cost to start an eyelash business?

An eyelash business is one of the most commonly searched small businesses. To get started, you may need to go to cosmetology school. Many states require school , but some do not.  If you haven’t already gone to cosmetology school, starting a small business will cost more than $20,000. 

Most eyelash small businesses run as a combination of brick and mortar business and traveling to their client’s location. We’ve provided you with estimates of how much to expect startup expenses to cost based on the assumption you haven’t already gone to cosmetology school.

Subtract $20,000 from any of these numbers if you have already gone to school. I included legal fees and insurance costs in the low cost startup funding because you don’t want your new business to be slapped with a major fine for operating illegally.

H ow much does it cost to start a cleaning business?

Cleaning businesses are great for startups. You can even start your own business for as low as $300 if you just buy the cleaning supplies. Almost all the costs are variable expenses. 

However, you should get the business license and the insurance as soon as possible if you decide to get them after you get started. The ultra low cost way assumes you rent any equipment after booking a job that needs equipment.

Check out our interview with Christopher Mondragon below or sign up for our cleaning business course that covers pricing, business credit, Chris’s marketing scripts, and automation templates:

H ow much does it cost to start a jewelry business?

Many people enjoy doing arts and crafts like making jewelry. You can start a business out of this fun hobby for less than $100 and build your business as you grow. Premade findings are typically more economical, but creativity is often the joy of this type of business owner, so you might want to make your own pieces.

If you are trying to make gold and silver jewelry, you can expect the cost to be much higher. A troy ounce of gold varies based on market conditions, but has been between $1,000 and $2,000 over the last 15 years. It will only make about five to 16 rings, and you still have to have the tools to melt it. 

H ow much does it cost to start a storage unit business?

The answer to this isn’t particularly clear cut. If you are wanting to buy storage units that are selling people’s stuff to recoup the costs, you should plan to bring at least $500 to the auction. Then, hope you find a gem and recoup your investment.

If you are talking about building storage units and renting them out, you’ll need to:

• Buy land (acres range from $1,600 to millions, with an average of $12K over the continental U.S.
• Build storage space for $25 to $45 per square foot.
• Run the property for $2 to $4 per square foot of operating expenses. 

Check out Love to Know’s blog for more detailed information.

H ow much does it cost to start a food truck business?

You might be able to start a food truck for as low as $10K, but I’d expect to spend more like $20K to get started. You’ll probably need around $156K to make it through the first year and around $670,000 to make it through the first five years.

If you figure out a winning recipe, it can lead to a million dollar business, though.

Check out our video below to find out how Saied Samaiel makes more than $600K per year with his food truck:

H ow much does it cost to start a dropshipping business?

The cost of starting a dropshipping business can vary dramatically because you may have to design a product and purchase inventory. If you are using print-on-demand with dropshipping, it is often fairly cheap. 

Expect to spend at least $80 getting started, but if you are sourcing materials and manufacturing, it could be more than $30,000 to make your products. Through the course of a year, you might spend up to $180,000.

Check out our interview with Casey about how he created and dropships Shed Defender:

How much does it cost to start a candle business?

You can start a candle business for less than $200. The materials and a Shopify account are all you need to get started. The numbers below are from our interview with Jazmin who started the company in 2020 and is making more than $150K per year.

Check out our interview below:

How much does it cost to start a towing business?

A towing business can be started for under $10,000. It has special licensing requirements that raise the cost and most people don’t own a tow truck. You can typically make around $100,000 per truck––if you do it right. 

Check out our interview with a towing company business owner to learn more:

How much does it cost to start a painting business?

You should expect to spend $5,000+ to start a painting business because you’ll need a contractor’s license in most states to start a painting business. Contractors’ licenses have financial requirements that make them more expensive. States may require:

• Background checks
• Surety bonds
• Multiple years of experience 
• Licensing exams

How much does it cost to start a detailing business?

You can start a mobile detailing business for as little as $300, but you should probably expect the annual costs to approach $53K to really grow. That includes licensing, insurance, a vehicle, upgrading your website, and spending $2K per month on marketing. Check out the breakdown below:

H ow much does it cost to start a trucking business?

Trucking businesses will normally cost around $10,000 to start in-state or $20,000 for interstate operations, but you can expect to spend $100K to $250K per year to run a trucking business. 

Make sure the truck you buy is less than 10 years old because most companies require a newer vehicle when hiring you to haul their products.

Check out our interview with Mikael Sant. He averages $75K a month running Sant Lines LLC:

How much does it cost to start a taxi business?

Taxis are a dying business in most places. The business structure is antiquated. You have to register with your city’s transit authority, hire dispatch, and buy a bunch of taxis. We’ve provided an estimate for starting with five taxis running 24 hours a day.

If you already have a car, you can start driving for Uber or Lyft. All you have to do is get a business license, pass a background check, and have a current car inspection. You can run a successful business fairly easily. The startup costs for this kind of business is around $300.

How much does it cost to start a laundromat business?

Starting a laundromat can cost nearly $1 million to get started and about twice that over the first five years. The building, equipment, and utilities are most of the cost.

Check out our interview with Justin Pike of Ferndale Laundry:

How much does it cost to start a photography business?

You can start a photography business for as little as $500, which includes the price of the camera, a website, online photo gallery, and Adobe Photography Suite.

If you want to upgrade to a higher end business with better equipment and a good marketing budget, you should expect to spend around $45,000 the first year. It’s even higher if you want a good studio, however.

Check out our interview with a couple that started their own photography company:

How much does it cost to start a handyman business?

Most places require handymen to be licensed contractors, so you can get started for as low as $2,750 without risking violating laws, but you can expect to spend around $40,000 during the first year if you really want to do it right.

Check out our interview with Caleb to find out how he makes $125K per truck:

How much does it cost to start a soap business?

Soap businesses are fairly inexpensive to start. You could start making soap for under $100 and build from there. Successful business owners will spend nearly $70K in their first year of business to make around $200K. Check out the TruIC blog for the steps to start a soap business.

Small Business Owners Funding Resources

Now that you know the costs associated with starting a business, check out some of our resources for finding funding. 

• Business Credit : Check out our preferred lending partners to get small business loans or a business credit card.
• Business Hub : Learn how to start a business entity, get insurance, and estimate a company’s revenue in our hub .
• Small Business Administration : Get information from the SBA on grants, loans, and local business resources.
• Evaluate Funding Options : Whether you are using a personal savings account or looking for alternative funding methods, check out our funding blog .

What Type of Business Will You Start?

We’ve covered the typical expenses associated with the costs of starting a business. Now it’s time to examine your personal expenses and cash flow to cover the filing fee and other business costs.

Make sure to follow our YouTube channel and blog for more great information on how to start a business.

Which business do you think is a worthwhile investment? How will you manage the financial implications of starting a new business? 

80% of businesses fail... Learn how not to.

Learn from business failures and successes in 5 min or less. The stories, frameworks, and tactics that will make you a 10x better founder.

Brandon Boushy

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How to Hire Employees (in 7 Simple Steps)

• How to prepare to hire people
• How to create a job description
• How to screen applicants
• How to conduct an interview (and what not to do)
• How to provide a job offer
• How to onboard employees
• How to improve your employee retention

Step 1. How to prepare for the hiring process

• Establish what positions you need to hire.
• Get an employer identification number (if you don't already have one).
• Create an employee handbook.
• Establish employee benefits.
• Implement a payroll system.
• Purchase workers’ compensation insurance.
• Get workplace posters.

Establish what positions you need to hire

• Should you hire hourly vs salary employees?
• Can you hire independent contractors or freelancers?
• Is it reasonable to expect one person to have all the specialized skills you need?
• What software are you consistently using?
• What is your company culture like? What type of person will fit well in it?
• Does the employee need to be on-premises, or can you hire remote employees?

Each industry has different challenges

• Logistical 

Get an employer identification number (EIN)

Create an employee handbook

What to include in a handbook.

• Mission statement, company culture, and values
• Information required by an HR professional and legal professional
• Paid time off, benefits, and non-discrimination policies
• Obligations and rights of employees
• The company's expectations of employees
• Commitments the company makes to employees
• Link to the full company policies (I once had to review thousands of pages for an employer regarding complex legal requirements. Major corporations and franchises have a policy for almost everything. If you have contacts within major corporations, ask their HR and legal departments how they handle it.)

Establish employee benefits

• Paid time off
• Remote work options
• Paid leave to care for kids and aging parents
• Great insurance and 20 days of PTO per year
• No benefits

Implement a payroll system

Purchase workers’ compensation insurance, get workplace posters.

Step 2. How to create a job description

• Company Information: Tell people about your company. It helps you find the right candidates.
• Job Title: Include the official title the new employee will have.
• Salary: Many job boards will autofill this information if you don't include it.
• Job Description : Be clear about the activities the new employee will perform.
• Essential Abilities : What skills and software should qualified candidates know before starting?
• Preferred Qualifications: Give examples of experiences that an ideal candidate would have but aren't essential candidate's skills.
• Metrics : How you will measure the performance of the new hire.
• Why Choose You : The right candidate will make your company better than it currently is. Work to convince them that what they get from the deal is worth it; otherwise, you get deadbeats who just want to do a job and leave when they clock out.
• Locations: Where is the job located? If you want job seekers from a specific location, include it in the description.
• Be transparent. You don't want to waste your time or anyone else's. Build it based on search engine optimization best practices.
• Write your job descriptions using Search Engine Optimization best practices .
• When comparing employee and business desires, employees want to work from home at a rate three times higher than business owners want to allow. If you can, allow remote work. Jessica specifically said:

Step 3. How to find employees to hire

• New hire referral programs
• Social media

Try referral programs

• Four times more likely to be offered the job.
• Five percent more likely to accept the job offer.
• Nearly twice as likely to stay for over four years.

Post on social media

Don't forget to post on all the standard job boards

Work with recruiters.

• Performing a background check
• Reporting to each state's labor department
• Withholding taxes
• Workers’ compensation
• Paying the Social Security Administration

Step 4. How to screen applicants

Step 5. How to conduct an interview (and what not to do)

Starting the interview

• Good questions to ask
• Illegal questions to ask
• Arrive early : 15–30 minutes early likely means they believe if you're not early, you are late.
• Arrive on time : 15 minutes early to two minutes late means they believe in being on time.
• Arrive late : If you are waiting on them, they likely have a diva mindset. They might view their time as more important than yours. I'd thank them for coming out, but I don't appreciate the "fashionably late" mentality.

Ask good questions

• Our weekends.
• Where the industry is going.
• Our interests.
• Where the company is going.
• How we can create a mutually beneficial scenario.

Ask open-ended questions, but make them meaningful

Congratulations you get to deal with the labor board.

• Marital status
• Sexual orientation
• Transportation (except for a reliable way to get to work)
• Health conditions

Step 6. How to hire the right employees

• Title : You should have this match the title on the job description.
• Start Date : The first day of work is when the employee starts the job.
• Pay: Specify the amount and payment frequency. Make sure it is over minimum wage.
• Type of employment : Specify whether the offer is hourly, full-time, part-time, contract and duration, or for an independent contractor.
• Benefits: List any additional compensation like PTO, health care, etc.
• Intellectual property (IP) guidelines : Specify how intellectual property is used. Who owns it, how can previous IP can be used in the company services? These are mostly in tech-related concepts.
• Non-compete agreement (if applicable): Use these sparingly. Unless the employee has enough information to destroy your company by selling it to a competitor, you probably don't need these. Here's a non-compete template .
• Non-disclosure agreement (if applicable): Use a Form to prevent sharing insider information. Disclosing this information could be a violation of security laws. It also can harm the company. These are fairly standard practice.

Step 7. What to do after hiring employees

• W-4 form : Employee fills this out to specify how to withhold taxes. A W-9 is for tax purposes for independent contractors. These are necessary to calculate payroll taxes and income tax and send employment taxes to the federal government.
• E-Verify system : Verify employee eligibility in the U.S. without any paper.
• State tax withholding form: If your state has an income tax , you'll need to provide employees your state's tax agency form.
• Direct deposit form : You'll need to provide a direct deposit form to know how to pay an employee.
• E-Verify system : This is not a form but a way to verify employee eligibility in the U.S.

Bonus Step: How to improve your employee retention

• Improve your benefits package.
• Recruit staff.
• Add transparency to the steps of the hiring process.
• Perform exit surveys.

Friendly Reminder About Hiring

Frequently asked questions about hiring, how to hire 1099 employees.

• Prepare to hire people. (You won’t need to do tax deductions.)
• Create a job description.
• Find applicants.
• Screen job hunters.
• Interview potential candidates.
• Offer the best candidate a job.
• Onboard employee. (You’ll use a W-9 instead of a W-4.)

How to hire your first employees

• Establish what you need to hire employees to do.
• Get an EIN if you don’t already have one.
• Establish a benefits package.
• Get a payroll provider. 
• Purchase workers’ compensation.
• Follow the rest of our guide.

How to hire employees for a startup

• Prepare to hire people. (Consult a lawyer about alternative forms of payment.)
• Create a job description. (Make sure to include information about the alternative payments.)
• Find applicants with diverse backgrounds.
• Interview potential candidates and make sure they understand the pay. Have a lawyer advise you regarding communications if you plan to offer pay in stock (because you can’t ask about their finances).
• Onboard the employee.

How to hire diverse employees

• Go to college job fairs.
• Use TikTok to find employees.
• Ask minority influencers to help you find candidates.

How to hire part-time employees

• People spend time getting ready for work, going to the location, and going home. Let them choose how they want to get their hours. They might prefer six 4-hour days or three 8-hour days, and with a little creativity, you can work with that either way.
• Make sure to keep their shifts consistent. Unless you are paying them $5K per month for part time work, they need a second job.
• The quality of employees is equal to the quality of treatment. They know you are hiring part time to avoid benefits. Be nice. Seriously. Low-paying jobs tend to be customer-facing. That means they deal with rude people all day long. Treat them well. Otherwise, they’ll run away like an ostrich.

How to hire temporary employees

How to hire good employees.

• Industry-leading pay : Just disclosing your pay for each position improves your success. In Colorado , job postings dropped by 8.2% while the participation rate increased by 1.5%. If you really want to lead your industry in pay, the average 1-bedroom is $1,326 per month and people have to make three times that ($3,978 or $24.86 per hour). I know that sounds crazy, but at those wages, you’ll be getting much better candidates. Even $2 over the median pay will normally lead to better employees.
• Generous time off : People have lives. They have stuff come up. We all know we don’t own our employees, but sometimes we get so focused on our own problems we forget to be compassionate about others. If you fall into this category, it’s your responsibility to train yourself to be more compassionate. It’s hard. I struggle with it every day, but we have to try to be good to those around us. Don’t make them beg for time off.
• Remote work when possible : Many positions don’t require people to be in the same space. If they can work from home, let them. You just need systems that make it easy to do so. The additional costs should be made up by better efficiency.
• Don’t skimp on benefits : Let people choose the benefits that are right for them. With medical insurance, don’t offer minimum wage employees plans with $10K deductibles. They are unusable.

How to hire international employees

How to hire remote employees

What part of the hiring process do you find most challenging.

How to Start an $80M/Year Construction Company

Have you ever wondered how to start a construction company but hesitated because you don’t have business experience or a previous business failed?

Marc Rousso knows what it’s like. His real estate business failed during the 2009 recession and left him owing the bank $2.5 million after liquidating everything. But within seven years, he grew JayMarc Homes into a construction company that makes $80 million annually, and he’s already paid off all the debt from his prior business.

We combine his insight with industry research to share everything you need to know to get into contracting (even if you have no money to invest).

How to start a construction company

We’ll cover each of the following topics. Read from start to finish or click any link to jump to the step you need help navigating right now.

• Learn about the construction industry.
• Decide how to start your own construction company.
• Write a construction company business plan.
• Choose a construction company name.
• Learn how to open a construction company.
• Set up your construction business finances.
• Establish safety protocols.
• Get equipment and supplies.
• Hire employees.
• Consider how to grow a construction business.
• Document your own business processes.

Step 1. Learn about the construction industry

• How much do construction companies make? According to IBISWorld Report 23 , the average company makes around $696K in revenue, but JayMarc Homes makes approximately $ 80 million per year.
• How much do construction company owners make? The profit margin for construction work is 3.4% before taxes, which means that the average small business owner makes approximately $23,664 in profit plus any salary they take from contracting.
• How many construction companies are in the U.S.? There are over 3.8 million construction companies in the United States, with an average of 2.63 employees.
• What is the most profitable construction niche? Land developers have the most profitable niche with an average pre-tax margin of 17%, followed by remodeling and excavation at 7.2%. Check out the table below for other segments' profit margins.
• How to start a construction company with no experience: Starting a construction company with no experience may be a challenge. The average home requires 22 subcontractors to build a house, so you’ll need lots of basic knowledge and soft skills to manage a contracting company without experience.
• How to start a construction company with no money: You can always book jobs and then rent the equipment needed to complete the job. Reinvest the profits into the business to reduce your costs over time.
• How much does it cost to start a construction company? Marc started his contracting business with around $15K. But other construction companies have started with much less. In fact, the VP Homes CEO entered the construction industry with $80 of tools and is now making $1.2 million per year.
• What skills do I need to own a construction business? You must understand building materials, each subcontracting field, and safety requirements. You might also need certifications depending on your niche.

Pro Tip: Subscribe to construction industry publications and local industry publications to keep updated on trends in your industry. Check out some of the popular industry organizations .

Case Study: JayMarc Homes

JayMarc Homes focuses on building custom homes. It was their second construction business after a company closure. They currently make about $80 million in revenue annually with a 10% profit margin, but Marc warned:

[su_quote] In any 10 years, you’ll probably have a 5% year, 10% year, 17% year, and 27% year. It all depends on the economy. [/su_quote]

Check out our interview with Marc below:

Next, you'll want to decide how to start a construction company.

Step 2. Decide how to start your own construction company

People who want to start contracting and construction companies have two main options:

• General contracting
• Subcontracting

Find out more about how to start a construction company as each of these types of contractors.

What is a general contractor?

A general contractor is the primary contact between a property owner and the construction project. Their role includes:

• Creating and managing the construction budget
• Hiring, managing, and paying subcontractors
• Working with the architect to implement and revise design specifications
• Maintaining project schedule and timing
• Scheduling inspections
• Making payments to vendors and specialty contractors
• Collecting and tracking lien waivers
• Managing post-construction issues with warranties and payments

How to start a general contracting business

Starting a general contracting business will normally require some or all of the following:

• time in the field
• education in the field
• passing an exam
• background checks
• security bonds

Find your state’s licensing requirements for how to start a small construction business as a general contractor .

What is a subcontractor?

Subcontracting businesses are normally construction services focused on specific trades like HVAC, plumbing, electrical, roofing, carpentry, or other fields with specialized construction equipment or tools. The bigger specialty contractors may also compete as general contractors.

For instance, when I worked at Honeywell, we would compete for both HVAC and general construction work when bidding on government contracts for new federal, state, and local projects.

There are plenty of business ideas in the construction industry to consider. Check out our courses here . The cleaning business, pressure washing, and flooring courses will all guide you toward success in the construction industry.

Once you've decided whether you want to be a general contractor or a subcontractor, you'll want a business plan to guide you through the process of how to start a construction company and succeed.

Step 3. Write a construction company business plan

You’ll need a construction business plan to be successful.

A solid business plan includes:

• Contracting insurance information
• Competitive analysis
• Construction equipment list
• Financial projections
• Location details
• Licenses and permits
• Marketing plan
• Money-making strategies

Pro Tip: Our business plan guide walks you through writing a business plan and includes a free template for getting your business plan in order.

We can't discuss how to start a construction company without discussing choosing a business name…

Step 4. Choose a construction company name

Choosing a name can be exciting! Consider the following tips when choosing a construction business name:

• Add your details: JayMarc Homes communicates what field the business entity is in, though it could also be a real estate business.
• Easy and clear: JayMarc Homes might be changed to JayMark by potential customers. When it comes to getting a website, I would buy both domains, just in case.
• Location: Construction companies can rank higher in search results with a business name that includes the city name.
• Branding: A new construction company will have other branding elements. How will they tie in with your new business name?

Pro Tip: Try out our construction business name generator . Find a name that ensures your business’s future success and click on it to buy the domain.

Next, we’ll discuss how to start a contracting business legally.

Step 5. How to open a construction company

After writing a business plan, you’ll need to establish a legal structure. While some businesses can get away without creating a business entity, it is legally necessary for a local construction company.

Building companies should consult with a business lawyer to make sure they comply with all the laws that govern small construction companies in their area.

Your new construction builder will likely need assorted licenses, permits, insurance, and tax forms. Find out what you’ll need from the Small Business Administration (SBA) and Municode Library .

Business structure for construction companies

Construction companies need to create a separate legal entity to keep company property and personal assets separate. Most construction companies will form one of the following structures through their state’s Secretary of State website:

• S-Corporation: Best for high-earning companies that want to lower business owner taxes. A limited number of stockholders, provides personal liability protection, requires business owners to receive a salary (and optional dividends), no double taxation.
• C-Corporation: Best for companies trying to change the world. Unlimited stockholders, provides personal liability protection, high compliance costs, and double taxation. Business owners can earn money through multiple income streams with different tax codes.
• Limited Liability Company: Best for companies that want to separate business entities from personal assets. Provides limited liability, pass-through income, and no double taxation.

Pro Tip: To learn more about business structures, check out our blog on 11 structure options .

You’ll also want to get your business licensed. Some states let you do it all at once. Don’t forget to grab an employer identification number (sometimes called a federal tax ID) from the IRS . It’s used for payroll and business taxes when starting a contracting business.

What licenses are needed to start a construction business?

A successful construction business will need different business licenses depending on your location and business plan. There are main categories of business licenses for a contractor business: general contractor’s license or subcontractor license. Check with local industry associations and the state and local government for more information.

Next, you'll need to thing about finances as you learn how to start a construction company.

Step 6. Set up your construction business finances

Financial management is an essential part of how to start your own construction business. Once you arrive at this step, you should already know your budget, but let’s look at how to:

• Get a business bank account
• Get small business insurance.
• Secure funding
• Create a pricing structure

Business bank account

To run a successful business, you need to open a business bank account because you need to separate your business and personal finances and assets. Business bank accounts can be either online or from brick-and-mortar (legacy) banks and credit unions.

Online banks tend to have better offers, but they might not have as broad a range of business credit card accounts and service offerings as the legacy banking system. If credit accounts or making cash deposits are important to you, go with the legacy banks. Learn more from our business bank account guide .

Get business insurance

You’ll want to get business insurance, including:

• General liability insurance: Covers against customer injuries
• Property insurance: Protects the business owner from expenses due to property damage
• Workers compensation insurance: Pays employees for lost wages and medical bills when they get hurt
• State disability insurance: Covers against full or partial disability
• Unemployment insurance: Covers former employees who are laid off
• Commercial vehicle insurance: Covers against accidents when driving

Pro Tip: Consider Simply Business to get the most competitive general liability insurance quotes for your business.

The contracting industry doesn’t cost a lot to get into, but funding is an essential part of starting a successful business. You might consider:

• Small business loans (including SBA loans)
• Equipment loans
• Angel investors
• Business partners
• Credit cards
• Crowdfunding
• Government programs
• Home equity loan
• Friends or family
• Personal finance through savings or wages
• Rollover for business startups ( ROBS )

Each method has its pros and cons. For example, SBA loans may be a good way for a new business to get a business loan because they typically have better interest rates than any other business loan. That said, the interest could start accruing before your first building is complete.

A business line of credit only charges interest on the money you use, making it a cost-effective way to fund your own construction company.

Pro Tip: National Business Credit is our preferred business financing partner.

Pricing structure

A construction company will have different ways of pricing. Some of the common ones are:

• Time and materials: You charge based on the time and materials used for the construction project.
• Flat rate: Charge an all-inclusive fee.
• Market value: If you’re designing and building a home, you might sell the property at market value. This can have huge profit margins if you can purchase materials for less than most local companies.

We cant talk about how to start a construction company without reminding you there are lots of safety laws you need to follow

Step 7. Establish safety protocols

Occupational Safety and Health Administration ( OSHA ) governs workplace safety and has special requirements about how to run a construction company. Supervisors will need the OSHA 30 certification. There are also personal protective equipment requirements for each trade.

Take OSHA requirements seriously to keep all parties safe from injury, fines, and legal action.

You'll need to get equipment because it's a crucial aspect of how to start a construction company.

Step 8. Get equipment and supplies

Construction businesses need lots of equipment and supplies, including:

• Personal Protective Equipment (PPE) : Hard hats, safety vests, safety goggles, lockout-tagout equipment, and eye protection
• Project Management Software: You’ll need construction management software like Monday Sales CRM .
• Heavy Machines: You might need excavators, dump trucks, cranes, concrete mixers, and other machinery .
• Hand Tools: You’ll need various tools depending on your specialization, but most construction workers will need at least a hammer and screwdrivers.
• Power Tools: Buy or rent drills, saws, and other power tools to make your construction jobs faster and easier.
• Specialty Equipment: Each field in the construction industry will need different tools. Make sure to research the crucial tools for your industry.

Check out our interview with Avanni Petras to find out how he dealt with the cost of equipment when he started Petras Homes on a shoestring budget.

When you think about how to start a construction company, are you thinking about having employees? If you are check out our next section.

Step 9. Hire employees

Hiring employees in the construction industry is a crucial aspect of how to start a home-building company. We asked Marc how many employees they have and he told us:

[su_quote]We have 45 employees, 30 in the office and 15 out in the field. Almost all our employees are referrals.[/su_quote]

Marc described some of the ways they help make JayMarc Homes a great place to work. He told us:

• During the first week, we don’t send them out to the field. We help them get to know everyone so they feel like they are part of the family.
• We have them read the book Exceptional Service, Exceptional Profit . It helps align new employees with quality services and business strategy.
• Once everyone gets to know the new employees, we get together and tell them positive adjectives that describe them — it builds them up and lets them know how amazing we think they are.
• Then, we do a naming ceremony where we establish team names.

He also told us

[su_quote]Over 10% of our workforce has left and come back.[/su_quote]

Pro Tips: It helps if the people you hire possess technical skills, but they can be taught. Here’s a great new hire checklist for a contracting business.

[su_quote]We’re a luxury brand. We sell premium customer service and have every model available as a home.[/su_quote]

Step 10. Consider how to grow a construction business

JayMarc Homes holds webinars where they teach people about the aspects of custom home building and home ownership.

[su_quote]Our webinars don’t make us money, but they help us build relationships where people trust us more and come to us when they are ready to build a custom home.[/su_quote]

Marc specifically recommends identifying your niche and mastering it. He told us:

[su_quote]If you don’t master a niche, you’ll have a hard time making a profit. You’ll effectively pay a dumb tax by trying to jump all over the place.[/su_quote]

Market research: Identify your customer

Hopefully, you did some market research about your target market when writing your business plan, but if you didn’t, it’s time for market research now. Small businesses in the construction industry might specialize in specific construction areas like remodeling. In Marc’s case, they have three primary customers they identify:

• High-end home buyers: The target audience for the homes they build and sell themselves. These will normally be people with 700+ credit scores who can afford a $3 million home.
• Landowners: Wealthy families who own undeveloped land and need to build their homes. These clients will normally have special features they want in their homes. JayMarc is able to offer them standard models or combine two or more home models.
• Distraught housing owners: These customers own or rent properties in wealthy neighborhoods. They create great opportunities to make higher profits by demolishing the home and replacing it with a new one in better condition.

[su_quote]We specifically drive the neighborhoods we want to build in and look for homes in the third category. We then build a relationship with them. It helps attract business when we remove an eye sore and replace it with a beautiful new home.[/su_quote]

Read more about identifying ideal customers and creating a customer persona.

Use this information in your own marketing strategy to help you find customers using digital marketing, which we’ll discuss next.

Digital marketing

In the digital age, your online presence is how customers find you. A website, social media accounts, email newsletters, and digital advertising are all practical marketing tools. Check out UpFlip’s helpful guide on creating a website .

Be sure to implement SEO for the best results. Services like Surfer can help you with that. And the best part is you can always perform a quick test to determine if your SEO is working.

Check out what Entrepreneur.com has to say about finding a reputable SEO company. And once you have your website, don’t forget to explore the following opportunities to improve SEO:

Try a digital business card service, like Popl , that allows you to link your contacts, websites, social pages, payment apps, and promotional material all from one page.

Instead of spending too much time scrolling through social media, make it work for your business! Facebook and Instagram provide free insights on business accounts with opportunities to run paid ads.

Managing multiple social media accounts can take a lot of time, and that’s something most small business owners don’t have to spare. Tailwind makes this easier by managing your email and social media marketing across platforms and is an especially useful tool for small businesses that don’t have the budget to hire dedicated marketing staff.

A newsletter is an excellent way to keep in touch with customers and send them coupons. Mailchimp and Constant Contact provide awesome email marketing tools.

Take your ad dollars one step further with broader digital marketing efforts. Consider pay per click (PPC), marketing automation, and other avenues.

Consider creating mailers, brochures, business cards, car magnets, flyers, t-shirts, and other promotional swag as a way of getting your name out there. Use an application like Canva to help.

Cold-calling and door-to-door advertising are less common these days than they were through the mid-’90s, but these methods can still be effective if done responsibly.

Pro Tip: Consider simple uniforms and vehicle branding to look professional and maximize advertising.

Get reviews to feed the crews

In addition, actively seek reviews ! You’ll need to ask every customer for reviews. Otherwise, negative reviews will prevail. For bad reviews (warranted or not), respond professionally .

Good feedback leads to new customers and encourages repeat business.

Step 11. Document your own business processes

Construction companies have lots of processes that have to be followed. From getting permits to inspections and proper building techniques, you’ll need to make sure everyone knows what to do.

Good processes scale easily for others to follow. You won’t stop being actively involved completely, but good processes will help you delegate better. Use Lucidchart to document them in a process map .

Here’s a basic “process” for documenting your processes:

• Set a goal for your process mapping session.
• Include all roles involved in the workflow.
• Identify the issue you hope to solve with the map.
• List all activities.
• Determine the triggers, inputs, and outputs.
• Flow out the steps and decisions because you can’t always depend on the “ideal” path.
• Make the final draft, get all roles to agree, and sign off on the process map.

For instance, the basic home building process includes:

• Commit to an architectural plan.
• Clear the land.
• Get building permits.
• Arrange for utility and infrastructure (electrical and plumbing) installation.
• Lay the foundation.
• Add the framing and roof.
• Install in-home plumbing and electric.
• Get inspections.
• Install fixtures.
• Get more inspections.
• Perform construction site cleanup.

Each of these will have subprocesses that need to be performed or managed, too.

Now you know how to start a construction company. It's up to you to do the rest.

Create a successful contracting business

The internet won’t replace the construction industry. Before starting your construction business, ask yourself these two fundamental questions:

• What do I need to research?
• Am I capable of providing a great experience through top-level customer service?

It might seem like a lot, but don’t overcomplicate it. In truth, you can start a construction business quickly.

Provide outstanding service, make money, and satisfy your customers. That’s all you need to succeed. Now you know how to start construction business operations. It's time to go forward and build.

What construction practices would you like to see improved?

KAIZEN: A Systematic Way to Transform Your Business (2024)

What is Kaizen?

What are the 5 elements of kaizen.

• Teamwork- Working toward a common goal
• Personal discipline- Holding oneself responsible for doing what is right
• Improved morale- Higher levels of happiness
• Quality- Fewer flaws, better craftsmanship
• Suggestions for improvement- Openness to ways to improve

What are the main principles of kaizen philosophy?

Know your customer, eliminate waste or "muda".

• Practice Gemba (be where work is performed)

Empower Your People

Measure and honestly share data.

• Customer satisfaction surveys
• Database of customer suggestions and complaints
• Industry Trends
• You are your customer
• Demographics
• Behavioral Research
• Carpenters, Craftsmen, Cabinet Makers
• Care about Efficiency
• Care about Quality

• Overproduction-producing too much of a product
• Waiting- Wasted time
• Transportation- Sending goods out of the way during the supply chain
• Overprocessing- Adding unnecessary features
• Movement- Taking steps that don't contribute to the process
• Inventory- Storing too much product and tying up cash
• Making Defective Parts- Wasting inputs.
• Underutilized Talent- Failing to allow employees to contribute as well as they could.

Practice Gemba

How Does Kaizen work?

Kaizen events, what is a kaizen blitz, what are kaizen workshops.

Continuous Improvement Best Practices

• Start your day with the 3S- Sweep, Sort, Standardize. Watch Paul explaining the 3S .
• Daily team meeting to get everyone involved in creating better change.
• If it bugs you, change it.
• Share your solutions so they can be standardized.

What are examples of kaizen?

Influencers.

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10 Small Business Startup Costs

If you buy into the Silicon Valley (opens in new tab) cliché, startup expenses boil down to a team of coders with gaming laptops, some cloud infrastructure, workspace in a hip incubator and an endless supply of Red Bull, all paid for by TechCrunch Disrupt (opens in new tab) prize money.

In the real world, there’s a bit more to it.

In robust economic times, startups can often get enough VC funding to launch a business in style without any plan on how they’ll become profitable. Those days are over, for now anyway. Profitability is the new metric, and as any B-school grad knows, strong unit margins depend on keeping a lid on costs right from the start.

For a startup, spending freely while relying on sales to keep your business in the black is a risky strategy. You need to scrutinize all spending—costs to establish your company, services, inventory, payroll, equipment, marketing, software, legal fees, even whether to hire a controller—then prioritize, document and continually assess.

What are Small Business Startup Costs?

Many new businesses, excited by their big ideas, neglect the careful planning and meticulous accounting needed to manage expenses. They rely instead on an expected flood of customers to keep operations afloat—sometimes with abysmal results, judging from small-business survival statistics.

You do need a plan, but you don’t need to start from scratch. The U.S. Small Business Administration provides templates (opens in new tab) tailored to three startup categories: brick-and-mortar businesses, online businesses and service providers. We also provide a template, below.

You’ll face different startup expenses depending on your business type, though most companies will need some equipment and supplies, communications and collaboration technologies, licenses and permits, professional services such as a lawyer and for-hire bookkeeper or accountant, advertising and marketing, and a website to reach customers.

Key Takeaways

• Estimating both one-time and ongoing costs ensures your business has enough capital to sustain itself for a period of time without completely relying on sales.
• Document, document, document: To get a loan, you’ll need copies of agreements with key suppliers and clients, a projection of expected income and costs and more. So keep records.
• Typical small-business startup expenses include research, licensing fees, payroll, insurance and rent.

Small Business Startup Expenses Explained

Startup costs are the expenses needed to launch a new business. Some, like costs to qualify to get into a type of industry or business, such as getting a license to practice law or sell real estate, aren’t deductible. But you can deduct $5,000 in startup costs and $5,000 in organizational costs (opens in new tab) in the first year of business as long as your total costs are $50,000 or less; if you spend more, you’ll need to amortize those costs.

Good to go:

• Legal, brokerage, accounting, appraisal and similar costs incurred to acquire a capital asset
• Customer surveys and other market research expenses
• Site selection costs when choosing a physical location
• Incorporation and partnership filing fees
• Salaries and wages for employees who are being trained and their instructors.

Don’t try it:

• Deductible interest and taxes, such as real estate
• If you’re setting up a partnership, related costs, such as a broker, registration and legal fees and printing costs
• Any costs incurred after you get the business up and running. At that point, you need to switch from startup to small-business deductions

As the SBA points out in its SMB guide, different businesses will have different types of expenses—a professional services firm may want offices, while an ecommerce store needs warehouse space.

However, there are a few types of expenses that are common for most types of businesses. What’s important to know is whether the IRS considers a cost a capital expense—that is, an asset, like machinery, office furniture or company vehicles, that’s carried on the balance sheet and depreciated over a set period of time.

Classification is important when looking to reduce business taxes because capital purchases are typically amortized or depreciated meaning the expense is spread out over several years.

It’s also crucial to determine a launch date for your business. From there, figure out the time period during which you can deduct startup costs. In most cases, you can go back as far as one year from your business’ startup date.

Why Calculate Startup Costs?

Calculating startup costs gives you a snapshot of the costs to launch and fund your business. How much do you need for one-off expenses, such as furniture? That shows how much capital you need for your business to open its doors.

Understanding recurring or ongoing expenses, such as payroll and cost of goods sold (COGs), helps you analyze your cash flow needs, so you know how much business revenue you need to at least break even. It also makes it easier for you to set aside enough money—say, six months’ worth of ongoing expenses—so you’re not heavily dependent on business revenue right away, or at least until you’re past the early stages.

Importance of Outlining Startup Costs in Your Business Plan

While venture capital has dominated headlines in the business press, very few companies pursue that financing route: In 2019, the VC industry spent $136 billion to fund just 11,000 U.S. companies. Many more businesses rely on credit cards, loans and lines of credit to fund their startup costs.

But whatever route you take, you must know approximately how much you’ll need before seeking outside funding. The documentation required for most loans includes copies of agreements with key suppliers and clients along with a detailed one-year projection of expected income and costs, with a narrative on how you expect to make those numbers match up.

10 Common Small Business Startup Expenses

Though the list below is divided into one-time and ongoing startup expenses, you’ll notice some of them overlap. What’s important is being thorough and honest about your expectations.

One-time expenses

Research expenses: A business plan provides an overview and a map of your new business. It will force you to consider costs and different strategies to ensure your business’ longevity. This includes carefully researching the industry you’re in, your target market and the best tax structure for you. If you’re hiring a market research firm, this expense needs to be put in your business plan.

Borrowing costs and raising funds: Financing can be in the form of equity (such as issuing stock)  or debt (such as a bond). Most small-business owners take on debt from banks or the Small Business Administration (SBA). Depending on the financial institution, you may need to pay an initial fee, such as an application or origination fee. Of course, there will be ongoing costs in the form of principal and interest payments.

License and permit fees: Depending on the nature of your business, you may need to obtain authorizations and inspections to get your business license or permit. Some industry-specific permits may cost more than others. You’ll also need to factor in filing articles of incorporation or articles of organization, depending on state guidelines.

Equipment and supplies: All businesses need some type of supplies and equipment. These costs may be one-time or ongoing, depending on whether you make a purchase outright or decide to lease.

Ongoing Expenses

Marketing: Advertising and promotion aren’t only for the early stages. You’ll need to develop and implement a marketing plan that should be factored into ongoing costs. And, don’t neglect a PR strategy, which can increase brand visibility and build trust with the public.

Payroll and benefits: The cost of human resources includes wages, salaries, commissions, bonuses, stipends and any employee benefits you have. Planning on fair compensation ensures lower turnover and attracts talent to your organization. This cost can also include contractors if you’re not hiring employees.

Insurance: Business insurance can include workers’ compensation and short-term disability. Experts warn to be careful of overspending here. Also consider insurance to protect your customers as well as your personal assets from any business-related legal liabilities. Insurance can either be an annual or monthly cost.

Utilities: Water, electricity, internet and phone bills are common costs for brick-and-mortar businesses. These costs can also apply to home office spaces, but you can’t deduct all your utilities.

Technology: Technological expenses include the cost of a website, information systems and business software, including accounting and payroll software. Some small-business owners choose to outsource these functions to managed IT service providers or virtual CFOs or accountants to save on payroll and benefits, while others choose to purchase software-as-a-service (SaaS).

Inventory: Businesses such as those in the retail, restaurant and manufacturing sectors may need to purchase initial inventory to start and budget for ongoing operations. You must carefully calculate to ensure there is enough inventory to operate, but not so much that you’re stuck with items that aren’t necessary or may spoil. The importance of good inventory management is hard to overstate.

How to Calculate the Cost of Starting a Business

Calculating your small-business startup costs can help attract investors and estimate when you’ll start making a profit. Below are the basic steps to get started.

• Create a list of necessary expenses. This includes one-time and ongoing costs.
• Research estimated costs. Get as close as you can to the real cost of each item on your list. Your research should include comparing different vendors to help you minimize expenses without sacrificing quality. Depending on your business, research can include equipment leases, rent, office supplies and contractor salaries.
• Total up expense amounts. Add up your one-time expenses. Then, look at how much your ongoing expenses will cost for one month and multiply that figure by several months to calculate your initial total startup amount. How many is “several”? That depends on when you realistically expect to see revenue or additional funding.
• Add a cushion. A six- to 12-month cushion will help you keep your operations going, since it is difficult to forecast sales accurately to start.
• Tally up the final amount. Add the cushion amount to your initial estimates to arrive at the final number.

Free Startup Costs Worksheet

Download this free worksheet (opens in new tab) to help you calculate your startup costs.

Using Expense Management Software to Track Startup Expenses

Calculating small-business startup expenses will be a much more streamlined process when you use  expense management software.  Software also helps to automate the expense reporting process , so you can see right away how much of your funding goes to paying for reimbursable operating expenses.

Plus, if you work with others on a team, having a single source of data that syncs in real-time makes collaboration easier. It also helps you to document your expenses easily for tax reporting and auditing.

Improve Expense Management Efficiency

Small Business Startup Expense FAQs

What are examples of startup costs.

Examples of startup costs include licensing and permits, insurance, office supplies, payroll, marketing costs, research expenses, and utilities.

What is the average startup cost for a small business?

Since businesses and industries have different requirements, costs depend on variables such as whether you need  office or warehouse space, physical inventory and licensing. That’s why it’s crucial to estimate costs, such as expenses you'll incur before your business officially opens, assets aside from cash and a cushion in the event of operating deficits during the early stages.

Financial Management

Free 2020 Small Business Expenses and Tax Deduction Checklist

Taxes are a top financial challenge for small businesses surveyed in NFIB’s annual Problems and Priorities report—taking up four spots among the top 10 challenges. Federal taxes on business income and state taxes on…

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Starting a Business | Ultimate Guide

Startup Costs Every New Small Business Owner Should Know

Published April 25, 2024

Published Apr 25, 2024

REVIEWED BY: Meaghan Brophy

WRITTEN BY: David Rivera

This article is part of a larger series on Starting a Business .

• 1 Cost Overview
• 2 Common Business Startup Costs
• 3 How to Save on Startup Costs
• 5 Bottom Line

Though startup costs can vary from business to business, almost all new businesses will have at least a few expenses, such as getting a business license, setting up a website, and marketing. Some costs of starting a business are not required but are helpful, such as an initial emergency fund or equipment.

For the simplest businesses, expect an initial spend of a little over $12,000 ; subsequent monthly costs will be lower, as some one-time expenses (such as business registration/incorporation and equipment purchases) will already have been taken care of. However, on average, small business owners spend about $40,000 initially.

Business Startup Cost Overview

• Business entity registration: $500–$3,500
• Taxes: Federal corporate tax at 21%; state tax from 2.5%–11.5%
• Small business loans: Varies based on business type and loan source
• Equipment: Varies (Monthly point-of-sale software, for example, runs $0–$400+; internet and phone costs are around $150+ monthly)
• Inventory: Varies
• Employee wages: Varies
• Storefront: $127–$300 per square foot (purchase); $22 per square foot (rental)
• Utilities: $200–$1,150 per month (700 square-foot space)
• Marketing, advertising & research: From $50 for a traditional ad
• Website: $0–$900 monthly for software; $15–$50 per hour if outsourced
• Insurance: From $350
• (Optional) Emergency funds

Common Business Startup Costs

Nearly all businesses, regardless of industry, will need to incur some startup costs for things like equipment, initial inventory, advertising, and marketing. Here are some common business startup costs you’ll need to factor into your plans when starting a business.

Legal Entity Registration

All businesses need to register their business as a legal entity―also called business structure―with the state it’s operating in. Registering as a legal entity protects the business owner’s personal finances if a lawsuit ever occurs against the business. Additionally, it protects your personal finances if the business goes bankrupt. On average, it costs $500 to $3,500 to register a business.

Limited liability companies (LLC), S corporations (S-corp), and C corporations (C-corp) are common business structures you can consider. To register a business, visit your state’s official business registration website.

• How to Register a Business + Checklist
• LLC vs S-corp vs C-corp

Taxes are easy for a new business owner to overlook. Federal corporate tax is at 21%; state tax runs between 2.5%–11.5%. However, as a general rule, put aside 25% of profits for taxes.

You may also want to budget for an accountant or certified public accountant (CPA) to file your business taxes. You can save on this cost if you file your own taxes. However, most business owners choose to have a professional organize and file their taxes.

• How to Calculate Business Taxes
• Business Tax Saving Tips
• How to Find an Accountant for Small Business

It’s possible to start a small business with minimal upfront capital—if you’re starting a bicycle repair shop in your own home or garage, upfront capital might need to cover just a few sets of tools, bicycle parts, and some print or poster advertising.

But you’ll need more upfront capital if your business has greater initial needs, such as advanced computer hardware and software, machinery and supplies, or vehicles. The most straightforward way to obtain this is by getting a small business loan . As a new business owner, you’ll have several different types of startup funding options available to you. You’ll need to prepare several requirements in preparation for taking out a loan.

It’s difficult to make a general estimate of how much a loan will cost you, as there are so many variables to consider: who you borrow from, your business type and its initial needs, timelines, interest rates, and more. You can put yourself in the best position possible by having a clear picture of how much you’ll need to borrow, and then approaching multiple lenders until you find the best terms for you.

• Startup Business Loans
• Small Business Loan Requirements

Equipment & Technology

Equipment and technology are other cost factors that can be difficult to predict, as it depends highly on your business type and scale of operations.

A small marketing shop may need nothing more than a few laptops, a cleaning business will need materials and transportation, and storefronts will need a point-of-sale (POS) system or other way of accepting payments and processing orders.

Other equipment and technology you’ll need in order to accept payments and let customers reach you include credit card readers (from $59), a reliable high-speed internet connection (up to $100 per month), and a business phone number (up to $50+ per month).

A product-based startup (as opposed to a service provider) will need initial inventory before opening for business. The exact quantities and corresponding costs will depend on exactly what you will be selling, and how much stock you want to have on hand.

If you are looking to purchase items from a wholesaler, your inventory costs will also depend on the terms that you and the supplier agree on. Meanwhile, if you plan to create the products yourself (handmade products, tailored clothing, herbs and plants, etc.), costs will depend on raw materials and how much product you intend to stock.

• 4-Step Product Sourcing Guide
• Types of Retail Suppliers
• Best Wholesale Suppliers

Employee Wages

In addition to payroll software, it’s wise to have enough cash to cover at least two months of employee wages before opening your business. This ensures you can cover payroll costs during any rough patches that may occur after you start your business.

For example, if you have three employees working at any given time, pay them on average $12 an hour, and are open 60 hours a week, that equates to approximately $20,000 ($12 x 3 x 60 x 9) you should have on hand. In addition to wage expenses, a good rule of thumb for any small business is always to have at least two months of all regular expenses saved in the bank.

If you can’t run your business from your personal residence—like a retail shop, restaurant, salon, or gym—you’ll need to acquire storefront space.

When planning out your budget for opening a retail store , you’ll have to set aside funds for leasing or purchasing a space. On average, this costs $127 to $300 per square foot (for purchasing) and $22 per square foot (for rentals). However, this will largely depend on the location and store layout you choose for your business.

If you’re opening a brick-and-mortar location, office utilities can add up quickly. For the average business with a physical location, budget $200 to $1,500 a month for utilities; this may include electricity, water, and trash.

Marketing, Advertising & Research

Marketing and advertising expenditures are unavoidable for any business these days. This is all the more true for startups that have no current market presence and no reputation to rely on just yet.

For marketing and advertising, you’ll need to consider not only the costs of creating and displaying the ad materials but also any additional expenses associated with market research. The best option for a business owner trying to get a startup off the ground while keeping costs down is to do all marketing and advertising in-house. You can create and edit marketing materials such as posts, images, and videos using services like Canva and CapCut.

New businesses with some extra starting capital, who prefer to outsource their marketing and advertising tasks, or who have gained some traction after doing this work in-house, can work with a marketing agency .

Here’s what marketing costs can look like:

• Traditional ad: From $50
• Email marketing software: $0–$50/month
• Email & graphic design: $5 to up to $1,000 per project
• Email-focused marketing agencies: $300–$500/monthly or $5–$100/project
• Paid social media ads: $1–$2 per click

If you want to learn more about the benefits and costs of various marketing methods, read our guides to email marketing and our social media marketing .

Website Costs

Small businesses that want to establish brand presence and begin getting potential customers’ attention will benefit from having a website. The cost of creating a website will vary depending on what type of business you are running and what it needs, plus whether you’ll be designing it yourself from scratch or hiring a professional.

If you choose to design your website yourself, you’ll need a program to help you do so; Wix, our top pick among website builders for small businesses , offers a forever-free plan. Designing your own small business website will mean more work, but you’ll keep costs predictable and have greater control over exactly how your website looks. The DIY route can go anywhere from $0 up to $900 per month.

If you choose to hire a website designer and developer, this will cost you a fee—likely an hourly rate. Payscale and GlassDoor report that a website developer commands an hourly rate of around $15 to $50, with an average of about $40 per hour.

In either case, you may want to purchase a domain name for your upcoming website and secure it before someone else does. Whether you go the DIY or outsourcing route, you’ll also want to keep all the costs for creating a website in mind, as well as best practices for website design .

Insurance protects a business owner against liability claims of a third party or employee. A common insurance expense for small businesses is general liability insurance , which protects businesses from injury claims issued by third parties, like customers.

General liability insurance typically starts at $350. If you have employees, most states require workers’ compensation insurance, which covers a worker injury on the job. Workers’ comp varies by state and the type of work; for example, in the retail industry, it can run between $590 to $1,500 annually.

Related: Small Business Insurance Costs, Coverage & Industries

Emergency Funds

An emergency fund is an amount of cash set aside to be drawn upon in case of unexpected but urgent events, such as illnesses, job loss, or the sudden breakdown of vital equipment. These funds should exist in the form of cash or liquid assets—so that the money can be accessed quickly and so that you won’t need to draw funds from sources that might hit you with high interest rates or cause problems in the future, like unsecured loans or retirement funds.

Building an emergency fund is simple, but not easy. Put away a certain amount of cash as often as you can, and don’t touch it except for emergencies. There are few fixed guidelines on how much cash your emergency fund should contain—and more cash is obviously better—but a general recommendation is to put away enough to keep your operations afloat for at least three months.

• Do You Need a Business Savings Account?
• 7 Ways to Solve Cash Flow Problems

How to Save on Startup Costs

While paying a certain amount is inevitable when starting a business, there are avenues you can explore to reduce expenses and minimize your total startup cost. Here are some options to consider.

Outsourced vs In-house Tasks

Almost any task a business performs can be outsourced if the business owner chooses to do so. This can range from basic functions like accounting, marketing, and payroll to core tasks that define a business, such as content creation and other types of labor. And outsourcing isn’t going anywhere; revenue for general business process outsourcing in the US is predicted to hit a massive $152 billion by 2028 .

Outsourcing tasks has pros and cons, but a common reason to do it is to save on costs. This can be especially helpful if the business is just starting out and the budget is tight, or if the business model lends itself to outsourcing anyway.

For example, a marketing agency in the United States might outsource much of its content writing to freelancers or full-time employees in the Philippines; this will save on employee wages (often to a significant degree) and thus on initial and ongoing costs for the US employer.

Similarly, there may be situations in which in-house work actually saves more money, either initially or in the long term. It’s up to the business owner to design and evaluate their business model, keep track of costs, and consider all the possible options to save money.

Renting vs Buying

For unavoidable costs such as computer equipment, software, and some kind of physical workspace, startup business owners have the option to rent or buy. Renting means lower payments in the short term, but you will not own the equipment, and you’ll be paying forever (or as long as you choose to continue renting).

Buying, on the other hand, will mean that you own the equipment or space outright. This necessitates a much larger initial cost if you are paying full price upfront (though you may be able to negotiate monthly or yearly payments), but it is often a better long-term solution because you will one day no longer need to make payments, but will still own and use the equipment. Again, it’s up to the business owner to crunch the numbers and figure out whether renting or buying is the better option for both short- and long-term savings.

Frequently Asked Questions (FAQs)

Read through the sections below for a quick summary of some common business startup costs, plus an estimate of how much money you’ll need to start.

What are the costs of starting a business?

Expect to spend a little over $12,000 for your startup initially. This will cover any equipment and technology required by the business; starting inventory if you sell products; small or large office spaces; and expenses for marketing, advertising, and a website.

How much money will I need to start a new business?

This will vary greatly depending on many factors. However, a baseline starting capital of at least $3,000 will allow you to make headway with equipment and software, inventory, website design, and some marketing.

Bottom Line

Understanding some common startup costs before starting your business is important so that you can prepare enough capital to get things off the ground. You don’t want to be in a situation where you’re going back to the bank or investors for additional funds before you have any customers. It’s helpful to document each startup cost in a business plan to show you’ve created a thorough plan to determine the funds needed to open your business.

About the Author

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David Rivera

David Rivera is a Retail Staff Writer at Fit Small Business focusing on point-of-sale systems. Since 2016, he has produced and optimized content for a variety of industries including ecommerce and luxury retail. For the past couple of years he has focused more closely on ecommerce and retail topics as well as point-of-sale systems.

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The Importance of Market Research

Creating a business plan, legal requirements, exploring funding options, crafting a marketing strategy, managing and growing your business, how do i start a small business for beginners, how do i create a business plan, what are six ways to grow and scale a business, the bottom line.

• Small Business
• How to Start a Business

Starting a Small Business: Your Complete How-to Guide

From market research to managing growth

The U.S. is home to 33.2 million small businesses, which drive over 43% of GDP.   If you are looking to start a business, there are key factors to consider—from market research and creating a business plan to scaling your business. These factors are critical to your journey and can make a big difference no matter what stage of the process you are in.

Entrepreneurs who take concrete action can differentiate themselves from competitors, innovate, and grow. For successful entrepreneurs, the execution of the business is often what means the most. 

Key Takeaways

• Starting a small business involves extensive market research of your target audience, competitors, and gaining a deep understanding of the industry.
• It is important to build a comprehensive business plan that includes the product or service description, your target customers, financial projections, and all other key details.
• Understanding the legal requirements of starting your business involves knowledge of business registration, permits, licensing, and other regulatory requirements.
• There are various types of funding channels for starting a business, including financing it yourself, securing external funding from your network, and applying for government and corporate grants and loans. 

Being clear about your business goals involves doing your research. Successful entrepreneurs often do extensive research on their field. This includes understanding their prospective customers, the technical aspects of the industry, and the challenges other businesses are facing. 

Understanding how other players operate in an industry is important. Attending conferences, joining associations, and building a network of people involved in the field can help you learn how decisions are made. Often, comprehensive market research takes six months to a year. 

Understanding Your Target Audience

Knowing your target market is critical for many reasons. These are the customers who are most likely to purchase your product, recommend it to friends, and become repeat buyers. Apart from driving your bottom line, having a strong understanding of your target audience will allow you to tailor your offering more effectively, reach your customers more efficiently, and manage customer expectations.

Compiling demographic data on age, family, wealth, and other factors can give you a clearer understanding of market demand for your product and your potential market size.

It’s important to ask, “Why would someone buy this and part with their discretionary income?” or “Will someone love this enough to tell someone about it?” At the heart of these questions is understanding whether your business solves a key problem, as well as whether it delivers the “more” that connects to your audiences’ human emotions.

Assessing Market Trends and Opportunities

To find an advantage in a given market, look at key market trends in customer behavior and the business landscape. Explore the state of business conditions and consumer spending, along with the economic environment and how interest rates may affect financing and business growth.

Several resources are available to dive into market trends across industries, such as Statistics of U.S. Businesses and the U.S. Census Business Builder . To analyze the competitive landscape, and in turn, identify key opportunities, Porter's 5 Forces is a classic model to help businesses build their competitive strategy.

A business plan is a road map for achieving your business goals. It outlines the capital that you need, the personnel to make it happen, and the description of your product and prospective customers.

There are a number of models for creating a business plan. The Small Business Administration (SBA) , for instance, provides a format that includes the following nine sections:

• Executive summary: This should be a description of your company and its potential for success. The executive summary can cover your mission statement, employees, location, and growth plan.
• Company description: This is where you detail what your business offers, its competitive advantages, and your strengths as a business.
• Market analysis: Lay out how your company is positioned to perform well in your industry. Describe market trends and themes and your knowledge of successful competitors.
• Organization and management: Who is running your company, and how is your business structured? Include an organizational chart of your management team. Discuss if your business will be incorporated as a business C or S corporation, a limited partnership, a limited liability company, or a sole proprietorship. 
• Service or product line: Here is where you describe how your business will solve a problem and why this will benefit customers. Describe how your product lifecycle would unfold.
• Marketing and sales: Detail your marketing strategy and how this will reach your customers and drive return on investment. 
• Funding request: If you're looking for financing, lay out the capital you’re requesting under a five-year horizon and where, in detail, it will be allocated, such as salaries, materials, or equipment. 
• Financial projections: This section shows the five-year financial outlook for your company and ties these to your request for capital.

Having a coherent business plan is important for businesses looking to raise cash and crystallize their business goals.

Setting Goals and Strategies

Another key aspect of a business plan is setting realistic goals and having a strategy to make these a reality. Having a clear direction will help you stay on track within specified deadlines. In many ways, it allows companies to create a strategic plan that defines measurable actions and is coupled with an honest assessment of the business, taking into account its resources and competitive environment. Strategy is a top-down look at your business to achieve these targets.

Financial Projections and Budgeting

Often, entrepreneurs underestimate the amount of funding needed to start a business. Outlining financial projections shows how money will be generated, where it will come from, and whether it can sustain growth. 

This provides the basis for budgeting the costs to run a business and get it off the ground. Budgeting covers the expenses and income generated from the business, which include salaries and marketing expenses and projected revenue from sales.

Another important aspect of starting a business are the legal requirements that enable you to operate under the law. The legal structure of a business will impact your taxes, your liability, and how you operate.

Businesses may consider the following structures in which to operate:

• Corporation
• Limited Liability Company (LLC)
• Partnership
• Sole Proprietorship

Each has different legal consequences, from regulatory burdens to tax advantages to liability being shifted to the business instead of the business owner.

Registering Your Business

Now that you have your business structure outlined, the next step is registering your business . Your location is the second key factor in how you’ll register your business. In many cases, small businesses can register their business name with local and state government authorities. 

If your business is being conducted under your legal name, registration is not required. However, such a business structure may not benefit from liability protection, along with certain legal and tax advantages. Often, registering your businesses costs $300 or less.

Before filing, a business structured as a corporation, LLC, or partnership requires a registered agent in its state. These agents handle the legal documents and official papers on your behalf.

Businesses that are looking to trademark their product, brand, or business, can file with the United States Patent and Trademark Office.

Understanding Permits and Licenses

If your business conducts certain activities that are regulated by a federal agency, you’re required to get a permit or license. A list of regulated activities can be found on the SBA website, and includes activities such as agriculture, alcoholic beverages, and transportation.

There are many different ways to fund a business. One of the key mistakes entrepreneurs make is not having enough capital to get their business running . The good news is that there are several channels to help make this happen, given the vital role entrepreneurs play in creating jobs and boosting productivity in the wider economy.

Self-Funding vs. External Funding

Bootstrapping, the term commonly used to describe self-funding your business, is where companies tap into their own cash or network of family and friends for investment. While the advantage of self-funding is having greater control, the downside is that it often involves more personal risk.

External funding involves funding from bank loans, crowdfunding, or venture capital , among other sources. These may provide additional buffers and enable you to capture growth opportunities. The drawback is less freedom and more stringent requirements for paying back these funds.

Grant and Loan Opportunities

Today, there are thousands of grants designed especially for small businesses from the government, corporations, and other organizations. The U.S. Chamber of Commerce provides a weekly update of grants and loans available to small businesses. 

For instance, Business Warrior offers loans between $5,000 and $50,000 to small business owners. As another example, Go. Be. Elevate Fund offers $4,000 to grant recipients who are women and/or people of color business owners to help them grow their businesses.

When it comes to marketing, there is a classic quote from Milan Kundera: “Business has only two functions—marketing and innovation." In order to reach customers, a business needs a marketing strategy that attracts and retains customers and expands its customer base.

To gain an edge, small businesses can utilize social media, email marketing, and other digital channels to connect and engage with customers.

Branding Your Business

Building a successful brand goes hand in hand with building a great experience for the customer. This involves meeting the expectations of your customer. What is your brand offering? Is it convenience, luxury, or rapid access to a product? Consider how your brand meets a customer's immediate need or the type of emotional response it elicits. Customer interaction, and in turn loyalty to your brand, is influenced, for example, by how your brand may align with their values, how it shifts their perception, or if it resolves customer frustration.

Digital Marketing and Social Media

We live in a digital-first world, and utilizing social media channels can help your business reach a wider audience and connect and engage in real time. Given that a strong brand is at the heart of successful companies, it often goes without saying that cultivating a digital presence is a necessity in order to reach your customers. 

According to HubSpot’s 2023 report, The State of Consumer Trends, 41% of the 600-plus consumers surveyed discovered new products on social media and 17% bought a product there in the past three months.

Managing a business has its challenges. Finding the right personnel to run operations, manage the day-to-day, and reach your business objectives takes time. Sometimes, businesses may look to hire experts in their field who can bring in specialized knowledge to help their business grow, such as data analysts, marketing specialists, or others with niche knowledge relevant to their field.

Hiring and Training Staff

Finding the right employees involves preparing job descriptions, posting on relevant job boards such as LinkedIn, and effectively screening applicants. Careful screening may involve a supplemental test, reviewing a candidate's portfolio, and asking situational and behavioral questions in the interview. These tools will help you evaluate applicants and improve the odds that you'll find the people you are looking for.

Once you have hired a new employee, training is the next essential step. On average, it takes about 62 hours to train new employees. Effectively training employees often leads to higher retention. While on-the-job training is useful, consider having an onboarding plan in place to make the transition clear while outlining expectations for the job.

Scaling Your Business

Growing your business also requires strategy. According to Gino Chirio, executive vice president at the consultancy group Maddock Douglas, there are six ways that companies can grow their business to drive real growth and expansion:

• New processes: Boost margins by cutting costs.
• New experiences: Connect with customers in powerful ways to help increase retention.
• New features: Provide advancements to your existing product or service.
• New customers: Expand into new markets, or find markets where your product addresses a different need.
• New offerings: Offer a new product.
• New models: Utilize new business models, such as subscription-based services, fee-for-service, or advertising-based models.

With these six ways to grow a business, it is important to consider the risk, investment, and time involved. Improving your margins through new processes is often the most straightforward way to grow. Offering new features is also effective since it is tailored to your existing market with products you have already delivered.

By contrast, offering new products may involve higher risk since these have not been tested in the market. However, they may offer higher reward, especially if you have a first-mover advantage and release your product in the market before the competition.

A good place to start building a business is to understand the following core steps that are involved in an entrepreneur's journey : market research, creating a business plan, knowing the legal requirements, researching funding options, developing a marketing strategy, and business management.

A business plan is made up of a number of primary components that help outline your business goals and company operations in a clear, coherent way. It includes an executive summary, company description, market analysis, organization and management description, service or product line description, marketing and sales plan, funding requests (optional), and financial projections.

Business growth can fall into the following six categories, with each having varying degrees of risk and investment: new processes, new experiences, new features, new customers, new offerings, and new models.

Knowing how to start a small business involves the key steps of market research, setting up a business plan, understanding the legal requirements, exploring funding options, crafting a marketing strategy, and managing your business. 

For aspiring small business owners, these steps can help you successfully deliver your product or service to the market, and ultimately grow. While it can take a considerable amount of work, the payoffs are manifold: independence of work, personal fulfillment, financial reward, and following your passion.

U.S. Chamber of Commerce. " The State of Small Business Now ."

U.S. Small Business Administration. " Market Research and Competitive Analysis ."

U.S. Small Business Administration." Write Your Business Plan ."

U.S. Small Business Administration. " Choose a Business Structure ."

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

U.S. Small Business Administration. " Apply for Licenses and Permits ."

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

U.S. Chamber of Commerce. " 52 Grants, Loans and Programs to Benefit Your Small Business ."

Ogilvy. " Behind Every Brand Is a Great Experience, and Vice Versa—Why Today's Customer Expects Synergy ."

HubSpot. " The State of Consumer Trends in 2023 ."

Training Magazine. " 2022 Training Industry Report ."

Harvard Business Review. " The Six Ways to Grow a Company ."

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans for April 2024 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How To Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

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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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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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How to calculate business startup costs: an essential guide.

You might think that starting a business is simple, financially. Unfortunately, not all business startup costs are clear. There are some that you may not consider until you’ve begun the process. Some business expenses might occur that you’ve never even heard of. Business owners will tell you that startup expenses are more than just office space and furnishings. If you’re contemplating starting a business , learn how to calculate your costs here!

Here’s What We’ll Cover:

What are Business Startup Costs?

Common business startup costs, costs that occur after business has started, how much does it cost to start a business in the uk, key takeaways.

Any good business plan will go through the task of calculating business startup costs. These are the organizational costs that occur during the creation of a new business. Some are one-time expenses, while others are ongoing expenses. Regardless, understanding and budgeting for all of the possible costs is crucial to success. Startup costs require planning and accounting, and if a business neglects this then they are less likely to thrive.

There are some common business startup costs that should always be considered when doing calculations. They’re all listed below and are all necessary to start a business.

A Business Plan

Believe it or not, a business plan should be part of your startup costs. Business plans take time to create, and often require professional services to polish. They’re a road map and a financial plan to present to possible investors. Without this part of your financial plan, you’ll be less likely to secure funding. Startup funding is crucial to getting a business off the ground.

Research is a necessary part of any startup. The company needs to be able to prove that it’s viable in the market. If research is neglected, a company may enter the market offering products that are unnecessary.

Borrowing Costs

Borrowing costs take into account the business loans received for a startup. This includes interest on loan payments, as well as any fees applied to debts over time. Borrowing costs make up a large portion of startup costs until they are paid off.

Business Insurance and Business License Fees

Businesses are required to have insurance, and as such they will have insurance payments to make. There may also be a requirement for commercial property insurance when selecting where your business will live. Business licensing and permitting are also necessary costs to factor in.

Tech Expenses

In today’s world, businesses need technology to thrive. This includes digital marketing costs and software needs. Many businesses can’t function without business accounting software . They also need content marketing and advertisements to create an online presence. Without it, they may be doomed.

Office Equipment and Basic Supplies

If your business is going to exist in a physical space, office equipment and basic supplies are necessary. You’ll need office furniture, fixtures, and office supplies to get started. Without them, daily tasks won’t be completed.

Everything mentioned prior to this is related to setting a business up. However, they aren’t the only business startup costs. Startup also includes post-opening costs, such as the ones below:

• Employee Costs: Hiring employees will require additional funding. You’ll need to take into account employee salaries, employee benefits, and employee training. All of these will cost money for your business.
• Promotion: While online advertising was mentioned prior, it’s worth mentioning again. Promotion is key in this world. Without paying for promotion and advertising, a business likely won’t get far.

Most businesses have reported that it takes about £5,000 to launch. However, that doesn’t take into account all of the costs spent during the startup period. As a general rule of thumb, the startup period is about a year before everything is off the ground. Small businesses have reported that additional startup costs amount to about £23,000 in the first year. Those costs break down into the following categories:

• Legal Costs: £6,500
• Accountancy: £4,000
• Human Resources: £4,500
• Company Formation: £8,000

Most people state that they underestimated their startup costs by about £2,000. As such, building a cushion to provide that is recommended.

Starting a business isn’t cheap. In fact, it takes a lot of work and money before you can start earning money. As such, calculating your startup costs before you dive in is suggested. Understanding the needs of your business and their associated costs is a recipe for success. If you want more small business articles like this, visit our resource hub ! We love supporting small businesses.

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Startup Business Plans 101: Your Path to Success

By Jay Nair , Jul 24, 2023

It’s time — you’ve got a promising idea and you’re now prepared to invest the necessary effort to turn it into reality. Startup business plans are vital hack tools that will guide you through your entrepreneurial journey and a business venture with clarity and purpose.

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. These plans will serve as strategic documents outlining your company’s vision, mission statements, business objectives, target market, financial forecasts and growth strategies.

To simplify the creation of a robust business plan as an entrepreneur, you can harness the power of a business plan maker . This invaluable tool streamlines the process and ensures a polished and well-organized presentation.  Startup business plan templates provide pre-designed frameworks that can be customized to suit your specific industry needs, saving valuable time and effort while preserving the essential structure of a comprehensive business plan.

Ready to begin? Let’s go!

Just so you know, some of our business plan templates are free to use and some require a small monthly fee. Sign-up is always free, as is access to Venngage’s online drag-and-drop editor.

Click to jump ahead:

• Laying the foundation of your startup business plan
• Business plan executive summary
• Writing your business description
• Marketing & sales strategies
• Startup operational plans
• Financial plans – forecasting and projections
• Team and management
• Appendix and supporting documents

FAQs on startup business plans

• Use Venngage to create your startup business plan

Preparation and research: 6 steps to laying the foundation of your startup business plan

• What problem does your product or service solve? 
• Who are your target customers? 
• What differentiates your offering from existing solutions in the market? 

This self-reflection will help you establish a clear direction for your startup.

• Next, conduct market research to gather valuable insights about your target market , including demographics, preferences, and purchasing behavior . This data will enable you to tailor your product or service to meet the specific needs of your customers. Identify trends, industry growth projections, and any potential barriers or challenges you may encounter.
• Competitive analysis is another critical aspect of preparation and research. Study your competitors to understand their strengths, weaknesses, and strategies. Analyze their pricing, marketing tactics, customer experience, and product/service features. This analysis will allow you to identify gaps in the market and position your startup to offer a unique value proposition .
• Financial research is equally important during this phase. Calculate the costs associated with starting and operating your business , including overhead expenses, production costs, marketing expenses, and employee salaries. Assess potential revenue streams and estimate your expected sales. This financial analysis will help you determine the feasibility of your business idea and outline a realistic financial plan.
• Additionally, gather information about legal and regulatory requirements that apply to your industry and location . Understand the necessary permits, licenses, and certifications you need to operate legally. Complying with these regulations from the outset will prevent potential setbacks or legal issues in the future.
• Finally, organize your findings and insights into a coherent business plan. Create your business plan outline , list your business plan goals, strategies, target market, competitive analysis, marketing plan, financial projections and any other relevant information. This compilation will serve as a roadmap for your startup, guiding your decisions and actions moving forward.

You’ve just encountered a wealth of information and are well on your way to becoming a seasoned business owner! This can sometimes feel overwhelming. But don’t worry, take a moment to breathe deeply and remember how far you’ve come. You’ve got this!

To help you condense and organize your essential points, I have brilliant one-page samples of business plan layouts and templates that will capture everything in a concise format.

Knowing when to use a one-page business plan versus a more comprehensive plan depends on various factors. A one-page business plan is ideal for providing a quick overview, saving time, and internal planning. However, it may not suffice for detailed information, complex business models, or meeting external stakeholders’ expectations.

Ultimately, consider the purpose, audience, and complexity of your business when deciding whether to utilize a one-page business plan or opt for a more detailed approach.

Executive Summary: Your Startup’s Elevator Pitch

First impressions are crucial, and a concise yet comprehensive executive summary is your chance to grab potential investors’ attention.

To create a compelling elevator pitch, consider the following key elements:

Problem Statement : Clearly articulate the problem or pain point that your startup addresses. Emphasize the significance of the problem and the potential market size

Solution : Concisely describe your innovative solution or product that solves the identified problem. Highlight its unique features or benefits that differentiate it from existing alternatives.

Target Market : Define your ideal customer segment and outline the market potential. Demonstrate a deep understanding of your target audience’s needs, preferences, and behavior.

Competitive Advantage : Showcase the competitive edge that sets your startup apart from competitors. This could include intellectual property, strategic partnerships, cost advantages, or disruptive technology.

Business Model : Briefly explain how your startup generates revenue and sustains profitability. Outline your monetization strategy, pricing model, and any recurring revenue streams .

Traction and Milestones : Highlight any significant achievements or milestones reached by your startup. This could include customer acquisitions, partnerships, product development progress, or market validation.

Team : Showcase the expertise and qualifications of your founding team or business partners. Highlight key members and their relevant experiences demonstrating their ability to execute the business plan.

I can sense your eagerness to dive right in! To expedite your progress, I’m excited to present you with a collection of meticulously crafted executive summary templates. These templates have been thoughtfully designed and structured by Venngage designers, ensuring seamless integration into your thorough business plan. All you need to do is infuse them with your brilliant startup ideas, and you’ll be well on your way to success!

Now, remember that there’s still a ton of work to be done. Let’s take a moment to regroup and ensure we’re on the right track. Before diving into the process of writing your business plan , it’s imperative to gather a wealth of essential information. Conducting comprehensive research is key, and it should encompass the following aspects:

How to assess your target audience

To gain comprehensive insights into your potential user base, creating a user persona report is invaluable. This persona guide report will help you develop a detailed understanding of various user profiles, enabling you to tailor your products or services to meet their specific needs and preferences.

Understanding Your Market and Competition

Analyze your market and any trends relevant to your startup. Research your competitors, their strengths and weaknesses, and identify what differentiates your offering from the competition.

Developing a Unique Value Proposition

A business Unique Value Proposition (UVP) is a concise statement that communicates the unique advantage a product or service offers over competitors, addressing a specific problem or need. It highlights the distinctive value and benefits customers can expect, helping businesses attract and retain customers by differentiating themselves in the market.

Your unique value proposition (UVP) is the cornerstone of your startup, defining what sets you apart from your competitors. A strong UVP focuses on the specific benefits and solutions your startup offers to customers.

Company Description: Painting the Picture

Your company description allows you to showcase your startup’s unique features and provide more in-depth details about your business. This section should include:

The Purpose of the Company Description

Clarify the purpose of your business, your goals and how your startup is uniquely positioned to achieve them.

Essential Information to Include

Include details such as your company’s legal structure, location and a brief history of any founders or key personnel.

Showcase Your Company’s Unique Features

Emphasize the unique aspects of your startup, explaining how these features translate into a competitive advantage.

Allow me to provide you with a dash of inspiration to ignite the momentum for your startup business plan:

When it comes to showcasing your company’s unique features, keep in mind that it is essential to emphasize and highlight the distinctive aspects of your startup . Clearly articulate how these features set your company apart from competitors and translate into a tangible competitive advantage . 

Whether it’s through cutting-edge technology, innovative business models, exceptional customer service, or a combination of factors, conveying the value and impact of these unique features is crucial. By effectively communicating the benefits they bring to customers, investors, and partners, you can demonstrate the significance of your offerings and differentiate yourself in the market.

Product/Service Line: What You’re Bringing to the Table

This section highlights the finer details of your product or service offerings:

Detailing Your Product/Service Offerings

Provide a thorough description of your products/services, highlighting key features and their intended use.

Highlighting Features, Benefits, and Solutions

Demonstrate how your startup’s offerings solve specific problems or address customer needs through an analysis of product features and associated benefits.

Defining Your Pricing and Revenue Model

Outline your startup’s pricing strategy and how it aligns with the overall business model. Detail any plans for scaling or expanding your revenue sources in the future.

Presenting Your Market Research Findings

Share insights from your market research, including target customer demographics, market size, and growth potential.

Identifying Market Trends and Opportunities

Discuss current trends, emerging opportunities, and how your startup will capitalize on these developments.

Marketing and Sales Strategies: Spreading the Word

Developing a robust marketing and sales strategy plan aligns with your overall business strategy and ensures steady growth. Marketing planning will be an essential part of your journey once you’ve got your business plan tight-knit! Also, creating a marketing strategy can be the most fun part of your business plan!

Developing a Comprehensive Marketing Strategy & Plan

• Outline Specific Marketing Goals : Clearly define your marketing objectives, whether it’s increasing brand awareness, driving website traffic, generating leads, or boosting sales . Set measurable targets to track progress.
• Identify Target Audience : Conduct thorough market research to identify your ideal customer profiles. Understand their demographics, behaviors, preferences, and pain points. Tailor your marketing messages to resonate with their needs.
• Select Effective Marketing Channels : Consider both digital and traditional channels that align with your target audience and marketing goals. This may include online advertising, social media marketing, content marketing, search engine optimization (SEO), email campaigns, print media, events, or partnerships.
• Craft Compelling Messages : Develop persuasive and consistent messaging that highlights the unique value proposition of your products or services. Clearly communicate how your offerings solve customer problems or improve their lives.

5 Tips for Effective Sales Techniques and Growth Strategies + free templates

• Define Your Sales Strategy : Outline the approach and tactics your sales team will use to reach and convert customers. This may involve direct sales, channel partnerships, online sales, or a combination of strategies. Specify your sales process, including lead generation, qualification, nurturing, and closing.
• Expand Your Customer Base : Identify opportunities to expand your customer reach. Consider targeting new customer segments, entering new geographic markets, or exploring untapped market niches. Develop strategies to attract and engage these potential customers.
• Penetrate New Markets : Assess the feasibility of expanding into new markets or verticals. Market research will help you understand the dynamics, competition, and customer needs in these markets. Adapt your marketing and sales strategies accordingly to effectively penetrate and capture market share.
• Innovate Products/Services : Continuously evaluate and enhance your product or service offerings to meet evolving customer demands. Identify areas for innovation or improvement and develop a roadmap for launching new features, versions, or complementary offerings.
• Perform a SWOT analysis : By conducting a sales SWOT analysis , you will gather valuable insights to enhance your department’s performance. This analysis involves evaluating your company’s strengths, weaknesses, opportunities, and threats, enabling you to identify areas for improvement and capitalize on advantageous factors in the market.

Here’s a hack to get you organized – Get right into it with the help of these growth strategy templates and strategic planning templates :

Operational Plan: How Your Startup Will Run

Define an efficient and scalable operational plan, keeping in mind the following points:

Defining an Efficient and Scalable Plan

Outline the day-to-day operations, including processes, timelines, and necessary resources.

Legal Considerations for Your Startup Business

Identify any legal requirements or considerations, such as licenses, permits, or regulations that may apply to your startup.

Key Elements of Supply Chain Management and Logistics

Discuss supply chain and logistical aspects relevant to your business. Include details on how you plan to manage and scale these processes.

Here’s a kickstart on how you can structure your operating plans:

Financial Projections: Crunching the Numbers

A startup’s financial projections are vital in securing investor buy-in. This section should address:

The Importance of Financial Forecasting and Budgeting

Explain the significance of accurate financial forecasting, budgeting, and the assumptions made in your projections.

Identifying Key Performance Indicators (KPIs)

Highlight the KPIs used to gauge your business’s financial health and growth trajectory.

Outlining Funding Requirements

Detail the amount and type of funding your startup requires , including how the funds will be allocated and how this investment positions the company for growth.

Team and Management Structure: Building Your Dream Team

Your startup’s success depends on the people behind it. This section should cover:

Tips for Building the Right Team

Share your strategy for assembling a skilled team that supports your startup’s vision and growth trajectory.

Founders’ Background and Roles

Provide an overview of the founders’ backgrounds, their roles within the company, and how their skills contribute to the startup’s success.

Organizational Structure and Key Management Personnel

Outline your startup’s organizational structure, including any key management personnel who play a pivotal role in day-to-day operations.

Appendices and Supporting Documents: Backing Up Your Plan

Include any other relevant supporting documents, such as:

• Research data, market analysis, or competitor analyses.
• Financial statements, budgeting or forecasting data, and other financial documentation.
• Legal documents, agreements or contracts, and any patent or trademark information.

Finally, remember to review and update your business plan regularly as the industry, market, and competitive landscape evolve!

1. Why is a business plan essential for a startup?

A startup business plan is crucial for a startup because it provides a framework for strategic decision-making, facilitates financial planning, helps assess risks, aligns teams, communicates your vision, and ensures effective resource allocation. 

2. What should a startup business plan include?

A startup business plan should include:

• Vision and Direction : Set clear goals and objectives, and outline strategies to achieve them. With a well-defined plan, you will stay focused, make informed decisions, and ensure alignment with your vision.
• Market Analysis : A business plan necessitates thorough market research to understand your target market, identify competition, and assess product/service demand. These insights enable you to tailor offerings, meet customer needs, and gain a competitive edge.
• Financial Planning : By constructing a financial roadmap through projected statements such as income, cash flow, and balance sheets, a business plan unveils the expected revenues, expenses, and profitability. This comprehensive planning not only anticipates challenges and sets realistic goals but also serves as a magnet for attracting investors and securing funding.
• Risk Assessment : Devise strategies for risk mitigation and contingency planning. By proactively doing this, you can significantly enhance the likelihood of success by anticipating and effectively addressing potential obstacles.
• Communication and Team Alignment : From fostering effective communication with both internal and external stakeholders to aligning team members and showcasing your startup’s unique value proposition, a business plan plays a crucial role. It enables you to articulate target market insights, competitive advantages, and growth strategies to potential investors, partners, and employees.
• Resource Allocation : A business plan helps you identify the resources required to launch and operate your startup successfully. It includes an assessment of your human resources, technology needs, infrastructure requirements, and other key resources. By understanding your resource needs, you can allocate them effectively, ensuring that you have the necessary assets to execute your business strategy.
• Adaptability and Flexibility : Your business plan should be flexible enough to accommodate changes and adapt to new circumstances. Startups operate in dynamic environments, and a well-designed plan allows you to monitor progress, evaluate outcomes, and make adjustments as needed. This agility enables you to seize new opportunities and navigate challenges effectively.

3. What is the ideal length for a startup business plan?

The optimal length for a startup business plan typically depends on the specific requirements and intended audience, but a concise and focused plan of around 20 to 30 pages is often recommended.

4. How to write a good startup business plan?

To write a good and effective startup plan, include an executive summary, company description, market analysis, detailed products/services description and a clear marketing and sales strategy. Also incorporate a comprehensive financial plan, outline your organizational structure, and demonstrates your team’s expertise and capabilities. Your plan should be well-researched, concise, and compelling, with a focus on your company’s unique value proposition and market opportunity, making it attractive to investors and stakeholders.

Utilizing Venngage templates & other tools for success

A visually appealing and professional business plan needn’t be a daunting task. Leverage tools like Venngage Business Plan Maker for effective templates that cater to various industries and streamline the process. 

• Leveraging Venngage for Visually Appealing and Professional Business Plans

Venngage offers a range of templates designed specifically for business plans, allowing you to craft a polished and visually engaging plan without any design experience. Simply choose a template, customize it to suit your startup’s branding, and populate it with your content.

• Exploring Additional Resources and Tools for Entrepreneurs. In addition to Venngage, several other resources and tools can assist entrepreneurs in crafting the perfect business plan. Examples include:
• Small Business Administration (SBA) – Offers guidance on writing business plans and provides templates and resources for each section.
• SCORE – A nonprofit organization providing mentorship, workshops, and other resources for entrepreneurs.
• Industry-specific resources – Research relevant professional organizations, industry publications, and blogs to stay up to date on industry trends and insights.

Embarking on the entrepreneurial path may present formidable challenges, yet it offers abundant rewards in various aspects. Embrace the art of continuous learning, delving not only into the essence of your business idea but also immersing yourself in the vast world that surrounds it. Cultivate a genuine passion for understanding every facet of your enterprise, for it is through this journey of exploration that you will uncover invaluable insights and experience the true fulfillment of entrepreneurship.

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Here’s how businesses can deduct startup costs from their federal taxes

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IRS Tax Tip 2021-166, November 9, 2021

When starting a business, owners should treat all eligible costs incurred before beginning to operate the business as capital expenditures that are part of their basis in the business. Generally, the business can recover costs for assets through depreciation deductions.

For costs paid or incurred after September 8, 2008, the business can deduct a limited amount of start-up and organizational costs. They can recover the costs they cannot deduct currently over a 180-month period. This recovery period starts with the month the business begins to operate active trade or as a business.

Business start-up costs

Start-up costs are amounts the business paid or incurred for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit, and to produce income in anticipation of the activity becoming an active trade or business.

Qualifying costs

A start-up cost is recoverable if it meets both of the following requirements:

• It's a cost a business could deduct if they paid or incurred it to operate an existing active trade or business, in the same field as the one the business entered into.
• It's a cost a business pays or incurs before the day their active trade or business begins.

Start-up costs include amounts paid for the following:

• An analysis or survey of potential markets, products, labor supply, transportation facilities, etc.
• Advertisements for the opening of the business.
• Salaries and wages for employees who are being trained and their instructors.
• Travel and other necessary costs for securing prospective distributors, suppliers, or customers.
• Salaries and fees for executives and consultants, or for similar professional services.

Nonqualifying costs

Start-up costs don't include deductible interest, taxes, or research and experimental costs.

Purchasing an active trade or business

Recoverable start-up costs for purchasing an active trade or business include only investigative costs incurred during a general search for or preliminary investigation of the business. These are costs that help in deciding whether to purchase a business. Costs incurred to purchase a specific business are capital expenses that can't be amortized.

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Improve Your Work-Life Balance By Applying These 4 Business Skills to Your Personal Life Stressed? Try one of these four strategies to improve your work/life balance today. Hint: You already use them every day at work.

By Tivi Jones • Apr 24, 2024

Key Takeaways

• Analyze the opportunity costs of different activities and determine the trade-offs you're willing to make to prioritize what matters most to you.
• Embrace discomfort as an indicator or areas in your life that need adjustment. Be open to pivoting and experimenting with new approaches to find solutions and improve your balance.
• Treat your quest for work-life balance like you would a business plan — establish a "balance plan" for yourself and determine what you want your work-life balance to look and feel like.

Opinions expressed by Entrepreneur contributors are their own.

Although work-life balance has been a part of the public narrative since the 70s, entrepreneurs still struggle to understand how to even out the scales when it comes to building their businesses while still taking time to enjoy their lives.

Over the last decade of my entrepreneurship journey, I've learned that the same skills that led to my business success also helped me achieve the elusive balance in my life.

So I come to you with an unusual proposal. Instead of turning off your entrepreneurial mojo in the quest to achieve balance, crank it way up. Here are four elements I use daily to maintain balance.

Related: 6 Secrets Smart Leaders Employ to Achieve Work-Life Balance

Analyze opportunity costs and trade-offs

Instead of thinking of "balance" as "all things being equal and excellent" analyze the opportunity costs of the activities you're involved in. Then, determine the trade-offs you're willing to make, just as you might in your business.

As entrepreneurs, we understand everything has a cost. The root of making good trade-offs for the benefit of your work/life balance is taking time to analyze the opportunity costs of how you spend your time, resources, money and energy in relation to all areas of your life.

As an entrepreneur managing multiple companies, I actively make decisions about things I'm willing to let go of in my quest to honor what I care about most. Of course, those decisions can change, but I make the decisions without letting external forces make them for me.

One trade-off I recently made was lessening my relationship with social media. Since one of my companies is a marketing communications agency, this might be seen as a poor trade-off since social media is a key vehicle for client marketing. What I discovered was that I was spending too much time on social media as a consumer (and not a leader, influencer or producer). This was cutting into the time I could have spent on other activities I value more.

I value my time and prioritize trade-offs that give me more of it. In my work-life balance quest, time has become a core value for me, but yours might be different.

Pivot like your life depends on it — because it does

When we don't experience our ideal work-life balance scenario, we may feel stuck or even adopt an "it is what it is" mentality. But if there's one thing we know from entrepreneurship, it's the power of pivoting to help us see the growth we need.

Pivoting allows you to course-correct while still maintaining enough familiarity to avoid cognitive overload or to bite off more than you can chew.

In my world, the need for pivoting is fully driven by problems, challenges or discomfort. I like to say "discomfort is data" — and data, as you know, is a powerful tool.

If you're feeling discomfort in your quest for work-life balance, this means something has risen in your awareness that you can identify needs changing. The power is in pivoting around this discomfort to experiment with temporary or long-term solutions.

For example, I implemented this tool to solve a source of discomfort for me: my morning routine. My solution was to pivot and start experimenting. I kept some things the same, including my rising time, but I wanted to change almost everything else. I began pivoting to see what worked for me and what didn't. First, I coupled activities. Then I decoupled some activities. I also removed some activities and modified others.

The most important place to start is by asking yourself: Where am I experiencing discomfort in my work-life balance journey, and what's one pivot I can make today to improve it ?

Related: 4 Business Practices That Will Improve Your Personal Life, Too

Create a balance plan

Think back to when you first started your business — what was the one thing that everybody and their mama told you to have to get started? A business plan !

Your quest for work-life balance is no different. Do you have a "balance plan?"

Similar to how you would set aside time for strategic planning for your business, do the same for your personal life. Maybe you have non-negotiable items you do daily to help with balancing. Perhaps your balance plan is more of a playbook for how you handle certain things.

For example, do you have "calendar rules" for when you're online or offline at work? Do you have specific personal goals you track and report on with an accountability buddy just like you do with your professional goals? I do all these things and each of them contributes to my work-life balance.

Additionally, part of my balance plan is regular strategic planning around work-life balance with annual, quarterly and weekly goals. I even maintain a spreadsheet of all my goals together.

Since I'm the person at the center of my business, it's important for me to value the work I do for my personal life just as much as my professional life.

Before your next work-life balance pivot, take 30-60 minutes and come up with a balance plan for yourself. Start by asking yourself: What do I want my work-life balance to look and feel like?

Complete a plus/delta or post-mortem review

When you complete a launch in your business, the best way to improve upon your success, mitigate future issues and plan for the next launch is to do a post-mortem on the project, complete a plus/delta analysis or do a performance review.

But analysis and measurement shouldn't just be reserved for business operations. This same strategy can be used outside of your business to align your daily actions with your vision for running your life.

Analyze your work-life balance efforts with the same or similar cadence as your business efforts.

In my life, I adopted the "12-Week Year" methodology for strategic planning. Every week, I briefly review how well I did on my goals and use that information to plan for the next week. At the end of the 12 weeks, I analyze the entire process. Since I track my personal goals alongside my professional goals, I see the balance, because I kept all elements of my life as blended on my strategic planning pages as they are in real life.

Related: 10 Leaders Who Set Good Work-Life Balance Examples

Let's be real. Adulting is hard, and when you consider the added challenges that entrepreneurship brings, it can feel like an insurmountable endeavor to keep all the plates spinning. The truth is, being an entrepreneur is all about taking responsibility and accountability for your success, but that sense of responsibility and accountability doesn't end when you close your laptop and go from professional mode to personal mode.

Whether it's applying strategic planning to your personal life and creating a balance plan, embracing trade-offs, experimenting with pivoting on particular issues or conducting regular post-mortems on your balancing act, these are all tools in your arsenal. They are proven to work in business empires, so now it's time to apply them to You, Inc. and see what awesome growth you can achieve.

Entrepreneur Leadership Network® Contributor

Mission-Driven Business Owner, Partner + Leader

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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A.I. Start-Ups Face a Rough Financial Reality Check

The table stakes for small companies to compete with the likes of Microsoft and Google are in the billions of dollars. And even that may not be enough.

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By Cade Metz ,  Karen Weise and Tripp Mickle

Cade Metz and Tripp Mickle reported from San Francisco, and Karen Weise from Seattle.

Call it the end of the beginning of the A.I. boom.

Since mid-March, the financial pressure on several signature artificial intelligence start-ups has taken a toll. Inflection AI, which raised $1.5 billion but made almost no money, has folded its original business. Stability AI has laid off employees and parted ways with its chief executive. And Anthropic has raced to close the roughly $1.8 billion gap between its modest sales and enormous expenses.

The A.I. revolution, it is becoming clear in Silicon Valley, is going to come with a very big price tag. And the tech companies that have bet their futures on it are scrambling to figure out how to close the gap between those expenses and the profits they hope to make somewhere down the line.

This problem is particularly acute for a group of high-profile start-ups that have raised tens of billions of dollars for the development of generative A.I., the technology behind chatbots such as ChatGPT. Some of them are already figuring out that competing head-on with giants like Google, Microsoft and Meta is going to take billions of dollars — and even that may not be enough.

“You can already see the writing on the wall,” said Ali Ghodsi, chief executive of Databricks, a data warehouse and analysis company that works with A.I. start-ups. “It doesn’t matter how cool it is what you do — does it have business viability?”

While plenty of money has been burned in other tech booms, the expense of building A.I. systems has shocked tech industry veterans. Unlike the iPhone, which kicked off the last technology transition and cost a few hundred million dollars to develop because it largely relied on existing components, generative A.I. models cost billions to create and maintain. The cutting-edge chips they need are expensive and in short supply . And every query of an A.I. system costs far more than a simple Google search.

Investors have poured $330 billion into about 26,000 A.I. and machine-learning start-ups over the past three years, according to PitchBook, which tracks the industry. That’s two-thirds more than the amount they spent funding 20,350 A.I. companies from 2018 through 2020.

The challenges hitting many newer A.I. companies stand in contrast to the early business results at OpenAI, which is backed by $13 billion from Microsoft. The attention it has generated with its ChatGPT system has allowed the company to build a business charging $20 a month for its premium chatbot and offered a way for businesses to build their A.I. services with the technology that drives its chatbot, which is called a large language model. OpenAI pulled in around $1.6 billion in revenue over the last year, but it is unclear how much the company is spending, two people familiar with the company’s business said.

OpenAI did not respond to requests for comment.

But even OpenAI has had challenges broadening sales. Businesses are wary that the A.I. systems can generate inaccurate answers. The technology has also been troubled by questions about whether the data that supported the models infringed on copyrights.

(The New York Times sued OpenAI and Microsoft in December for copyright infringement of news content related to A.I. systems.)

Many investors point to Microsoft’s rapid sales growth as evidence of A.I.’s business potential. In its most recent quarter, Microsoft reported an estimated $1 billion in sales from A.I. services in cloud computing, up from essentially nothing a year ago, said Brad Reback, an analyst at the investment bank Stifel.

Meta, on the other hand, doesn’t expect to make money for years off its A.I. products, even as it increases its infrastructure spending by up to $10 billion this year alone. “We’re investing to stay at the leading edge of this,” Mark Zuckerberg, Meta’s chief executive, said during a call with analysts last week. “And we’re doing that at the time when we’re also scaling the product before it is making money.”

A.I. start-ups have been challenged by that gap between spending and sales. Anthropic, which has raised more than $7 billion with backing from Amazon and Google , is spending about $2 billion a year but pulling in only about $150 million to $200 million in revenue, said two people familiar with the company’s financials, who requested anonymity because the figures are private.

Like OpenAI, Anthropic has turned to partnerships with large, established tech companies. Its chief executive, Dario Amodei, has been courting customers on Wall Street, and it recently announced that it was working with Accenture , the global consulting company, to create custom chatbots and A.I. systems for companies and government organizations.

Sally Aldous, a spokeswoman for Anthropic, said that thousands of businesses were using the company’s technology and that millions of consumers were using its publicly available chatbot, Claude.

Stability AI, which does image generation, announced last month that its founding chief executive, Emad Mostaque, had resigned , just a week after the resignation of three researchers who were part of the five-person team that built the company’s original technology.

It was on track to generate about $60 million in sales this year against about $96 million in costs from its image generation system, which has been available to customers since 2022, a person familiar with its business said.

Stability AI’s financial position looks better than those of language-model makers like Anthropic because developing image generation systems is less expensive, A.I. investors said. But there’s also less demand to pay for images, so the sales prospects are more uncertain.

Stability AI has been operating without the support of a tech giant. After raising $101 million from venture capitalists in 2022 , it needed more funds last fall but was struggling to show investors that it could sell its technology to businesses, said two former employees, who declined to speak publicly because they were not authorized to do so. It raised $50 million from Intel late last year but still faced financial pressure, they said.

As the start-up grew, its sales strategy shifted, these people said. At the same time, it was spending millions a month on computing costs. Some investors pressured Mr. Mostaque to resign, according to an investor, who declined to speak publicly about a personnel issue. This month, after his resignation, Stability AI did layoffs and restructured its business to put the company on “a more sustainable path,” according to a company memo reviewed by The New York Times.

Stability AI declined to comment. Mr. Mostaque declined to discuss his exit.

Inflection AI, a chatbot start-up founded by three A.I. veterans, had raised $1.5 billion from some of the biggest names in tech. But a year after introducing its A.I. personal assistant, it had almost no revenue, according to one investor. The Times reviewed a letter that Inflection had sent to investors saying additional fund-raising was “not the best use of our investors’ money, especially in the context of the current frothy A.I. market.”

In late March, it folded its original business and largely disappeared into Microsoft, the world’s most valuable public company.

Microsoft also helped fund Inflection AI, whose chief executive, Mustafa Suleyman, rose to prominence as one of the founders of DeepMind, a seminal artificial intelligence lab that Google acquired in 2014. Mr. Suleyman founded Inflection AI alongside Karén Simonyan, a key DeepMind researcher, and Reid Hoffman, a leading Silicon Valley venture capitalist who helped found OpenAI and is on Microsoft’s board.

Microsoft and Inflection AI declined to comment.

The company was steeped in talented A.I. researchers who had worked at places like Google and OpenAI.

But almost a year after releasing its A.I. personal assistant, Inflection AI’s revenue was, in the words of one investor, “de minimis.” Essentially zilch. It could not continue to improve its technologies and keep pace with chatbots from the likes of Google and OpenAI unless it continued to raise huge sums of money.

Now Microsoft is swallowing most of its staff, including Mr. Suleyman and Dr. Simonyan.

This is costing Microsoft more than $650 million. But unlike Inflection AI, it can afford to play the long game. It has announced plans for the staff to build an A.I. lab in London, working with the kind of systems the start-ups are hoping will break through.

Erin Griffith contributed reporting.

Cade Metz writes about artificial intelligence, driverless cars, robotics, virtual reality and other emerging areas of technology. More about Cade Metz

Karen Weise writes about technology and is based in Seattle. Her coverage focuses on Amazon and Microsoft, two of the most powerful companies in America. More about Karen Weise

Tripp Mickle reports on Apple and Silicon Valley for The Times and is based in San Francisco. His focus on Apple includes product launches, manufacturing issues and political challenges. He also writes about trends across the tech industry, including layoffs, generative A.I. and robot taxis. More about Tripp Mickle

Explore Our Coverage of Artificial Intelligence

News  and Analysis

The spending that the tech industry’s giants expect A.I. to require, for the chips and data centers , is starting to come into focus — and it is jarringly large.

The table stakes for A.I. start-ups to compete with the likes of Microsoft and Google are in the billions of dollars. And even that may not be enough .

Demis Hassabis and Mustafa Suleyman, who both grew up in London, feared a corporate rush to build A.I. Now they’re driving that competition at Google and Microsoft .

The Age of A.I.

A new category of apps promises to relieve parents of drudgery, with an assist from A.I . But a family’s grunt work is more human, and valuable, than it seems.

Despite Mark Zuckerberg’s hope for Meta’s A.I. assistant to be the smartest , it struggles with facts, numbers and web search.

Much as ChatGPT generates poetry, a new A.I. system devises blueprints for microscopic mechanisms  that can edit your DNA.

Could A.I. change India’s elections? Avatars are addressing voters by name, in whichever of India’s many languages they speak. Experts see potential for misuse  in a country already rife with disinformation.

Which A.I. system writes the best computer code or generates the most realistic image? Right now, there’s no easy way to answer those questions, our technology columnist writes .

NYC congestion pricing start date set for June 30. See a map of the zone and how much it will cost

NEW YORK - New York City's congestion pricing plan has a start date. 

The controversial plan charges a fee to  enter Manhattan's Central Business District , which the MTA is now calling the "Congestion Relief Zone," which is surrounded by more than 100 MTA cameras that will scan license plates. 

The MTA estimates congestion pricing will result in 100,000 fewer vehicles in the zone every day. 

The MTA says congestion pricing is necessary not only ease street traffic but also to raise critical funds to support mass transit projects, such as revamping the subway signal system. The MTA says a revamped signal system will improve overall train service, particularly during rush hour, by making it possible to run trains closer together, and trains therefore less crowded. 

"I think the main thing is, New York is, at our density, we're a mass transit city, and many people have already come to the realization that it's cheaper and faster to travel by mass transit," MTA Chairman Janno Lieber said. 

When does congestion pricing start in NYC?

According to the MTA's website, congestion pricing will begin on Sunday, June 30. 

The MTA is still contending ongoing lawsuits , including one from the state of New Jersey. The MTA has pushed back against those lawsuits, and has said  the litigation is effectively  hampering their ability to make new improvements . 

What about MTA congestion pricing exemptions?

The MTA says there are some discounts and exemptions for congestion pricing. 

Among the discounts:

• A 50% discount is available for vehicle owners who are enrolled in the Low-Income Discount Plan . The discount kicks in after the first 10 trips in any month. 
• Residents in the zone whose household income is less than $60,000 may qualify for a tax credit
• The  Individual Disability Exemption Plan will provide relief for those who have medical conditions that prevent them from using mass transit. Similarly, an Organizational Disability Exemption Plan will address vehicles for organizations like Access-A-Ride
• Certain emergency vehicles will be exempt
• School buses, commuter buses and certain other buses will be exempt
• As will certain other specific types of government vehicles that perform public works

NYC congestion pricing map 

The congestion pricing zone encompasses Manhattan's Central Business District, including all of Lower Manhattan and running north through 60th Street. 

That area includes  the Queensboro Bridge, Queens-Midtown Tunnel, Williamsburg Bridge, Manhattan Bridge, Brooklyn Bridge, Hugh Carey Tunnel, Holland Tunnel and Lincoln Tunnel. 

What are the congestion pricing hours and fees? 

Peak congestion pricing time runs from: 

• 5 a.m.-9 p.m. Monday-Friday
• 9 a.m.-9 p.m. Saturday and Sunday

The toll structure listed below is for E-ZPass users. The MTA says fees for non E-ZPass users, such as tolls by mail, will "generally be 50% higher than the E-ZPass rates." 

• Passengers and small commercial vehicles will pay $15 during peak/$3.75 overnight
• Motorcycles will pay $7.50/$1.75
• Trucks and buses will pay either $24 or $36 and $6 or $9 overnight
• The fee will be reduced for drivers with an E-ZPass who use the following four tolled entry points in the zone during peak hours: The Lincoln Tunnel, Holland Tunnel, Queens-Midtown Tunnel and Hugh L. Carey Tunnel. Those credits include $5 for passenger vehicles, $2.50 for motorcycles, up to $12 for small trucks and charter buses, and up to $20 for large trucks and tour buses. There will be no credit offered during the discounted overnight period. 

Here's how to sign up for an E-ZPass . 

The MTA has posted extensive information about the congestion pricing plan on their website.

Pending congestion pricing lawsuits

Congressman Josh Gottheimer says pending lawsuits could halt the congestion pricing plan .

New Jersey lawmakers have argued congestion pricing would negatively impact the environment .  

"We should get an answer any day now. That could literally freeze it up and say you actually have to study the impact of the cancer-causing pollution that will come out because of more traffic," he said. "I'm very optimistic about these lawsuits. You gotta keep fighting this because families can't afford it."

Multiple suits have been filed in three separate federal courts.

Is HP's new All-In printer plan all that? Here's what you should know

QUESTION : Is HP’s All-In printer plan worth considering or should I buy something else?

ANSWER : There are so many options in the printer universe from many well-known brands which can make choosing one a little confusing.

Each brand tries to differentiate itself from the rest of the crowd by creating unique features and in HP’s case, the subscription model is their latest offering.

Instead of purchasing the printer, you lease it along with automatically delivered ink as an added convenience.

They are offering to eliminate the up-front cost of buying a printer by getting you to commit to a 2-year subscription for the device and the associated ink.

The plan also provides expedited tech support, next-business-day replacement in the event it fails, and the ability to upgrade every two years.

Whether this makes sense for you or not would primarily be based on how much and how often you print.

Data Doctors: With elections and more coming in 2024, here's how to spot deepfake videos

The basic plans

There are three printer plans to choose from, starting with the Envy at $6.99 per month, Envy Inspire at $8.99 per month or the OfficeJet Pro for $12.99 per month.

A very important parameter to consider for all three plans is that this price only includes 20 pages per month to be printed before additional fees are applied. Printing in color or black and white counts the same, which is another very important consideration.

They do offer higher page volume plans (50, 100, 300, etc.) that you can upgrade to for $2 a month for the next tier.

The calculations

HP Envy printers can be purchased outright for $99, while the 2-year subscription will end up being $167.76.  Your calculus starts with how much ink you’re likely to need in two years.

The replacement ink sells for $35 (black and tri-color) with an estimated yield of 120 pages in black and 100 pages in color.

If you primarily print in black ink only, you’re better off buying everything as you need it, especially if your printing volume fluctuates wildly from month to month.

They do provide a rollover for unused pages, so it isn’t a use-it or lose-it subscription.

No printer? No problem! Tips and tricks for a printer-free life

Connected printer

These printers must be connected to the internet to monitor your ink usage for automatic refills and without a connection, may have limited functionality.

If you cancel before the two-year subscription ends, the printer will stop printing at the end of your current billing cycle, and you’ll be charged a termination fee.

The termination fee can range from $60 to $270 depending on the printer model and whether you are in the first or second year of your subscription.

Is it for you?

If the convenience HP is offering is more important than the higher total cost of ownership over multiple years, it may be something to try.

For most consumers and small businesses, it’s probably not the best deal, since printers tend to last for much longer than two years.

There are also options like Epson’s EcoTank series that have a larger up-front cost but the ink can cost as little as $5 per year.

Consumer Reports has an evaluation of the ‘Cheapest Printers for Ink Costs’ posted here:  https://bit.ly/44eNT7S

Ken Colburn is the founder and CEO of Data Doctors Computer Services,  datadoctors.com . Ask any tech question at  facebook.com/DataDoctors  or on Twitter  @TheDataDoc .

Insider Q&A: Avelo Airlines CEO Andrew Levy describes the challenges of starting a new carrier

It’s not easy to break into the U.S. airline industry, which is dominated by four big carriers and a sprinkling of other niche players, but that didn’t scare away Andrew Levy.

Neither did a pandemic that briefly caused air travel to plummet more than 90%.

In April 2021, while COVID-19 still raged and billions of dollars from taxpayers were propping up big airlines, Levy launched Avelo Airlines with flights between Burbank, California, and Las Vegas.

The airline saves money by flying older Boeing 737 jets that can be bought at relatively low prices. It operates out of less-crowded and less-costly secondary airports, and flies routes that are ignored by the big airlines.

Levy was involved in the launch of ValuJet, which became Allegiant Air, and he also did a stint as the chief financial officer of United Airlines before starting Avelo (it rhymes with yellow).

He spoke with The Associated Press about the challenges of starting a new airline, how the carrier is doing, and plans to sell shares to the public. The answers were edited for length and clarity.

Q: Why did you think you should start a new airline?

A: Shortly after I left Allegiant in 2014, I actually started thinking about about doing this. The market had become very consolidated, and there was a lot of opportunity that was out there that wasn’t being served by the existing, incumbent carriers. You have these four behemoths that are massive, that are protected by the government it seems, because certainly they’re stronger than they have ever been, after the pandemic. My view was we had room for more.

Q: What have you learned?

A: While there are these four behemoths, the toughest challenge, quite honestly, might even be the regulatory regime. For smaller companies like ours, it imposes these really substantial burdens on us. I’ll give you an example. For the (Department of Justice) lawsuit (against) JetBlue and Spirit, we had to go spend a ton of money on our end to produce documents for something that we really didn’t care how it ended up. And they’re trying to get us to do the same thing for Alaska-Hawaiian, which again, we could care less if Alaska and Hawaiian merge.

Q: How do you get people to fly on a new airline?

A: Number one, you have an awareness issue. You want people to know that you exist. So that’s one challenge, which is more of a marketing challenge. The other challenge is of course getting people to trust you. Like, ‘Who are these people? Are they going to really get me there? What’s the airplane going to look like? Is it safe? Is it reliable? What happens if something goes wrong?’ All those questions that most consumers may have when they think about choosing an airline that perhaps they’re unfamiliar with. You just have to focus on doing a really great job. Obviously not every flight is on time, but as time goes on I think people recognize that, hey, you know what? These guys offer a lot of value. We offer great convenience.

Q: Where does the name, Avelo, come from?

A: There’s no great story there. I wish I could tell you it was. It was a play on two words: velocity, which is swift in Latin, and convenience.

Q: Avelo reported a profit for fourth quarter 2023 but gave no details. Was that on a GAAP (generally accepted accounting principles) basis? And how much was it?

A: We actually have cash that generates interest income nowadays. Those are GAAP numbers where we have audited financials from Ernst & Young. These are real numbers with no adjustments or anything else. I’m not going to give you the numbers because we are a private company and so we have no real need to provide that kind of information. I’ll tell you that we made money in the first quarter as well.

Q: You've talked about your cost advantage as a startup. Is that sustainable?

A: Most costs creep up over time for every airline because our labor costs are tied to pay scales, but it is very sustainable. It’s based on how we designed the business. We distribute our product directly to the customer so we don’t use third-party intermediaries. We go in to smaller, more convenient, less-expensive airports. Your taxi times are lower; you’re not burning gas. We spend money on things that matter, and that includes our people. Our pilot pay is very competitive. It’s not the same as United Airlines, but it’s extremely competitive. We operate older equipment also — midlife (Boeing) 737 NGs, and those are certainly less expensive than brand-new aircraft. They burn a little bit more gas, but not much, and we like that trade.

Q: Do you plan to sell stock to the public, and when?

There’s obviously two issues. The single biggest one is one we don’t control, which is when are the IPO markets going to be actually open and vibrant, and they’re not right now. Beyond that, we have to be ready as a company. We put two straight quarters of profits ... so we expect every quarter this year to be profitable. We hope that we’ll have a company that people would want to own, and hopefully by year end or sometime next year. There’s no magic to being public for us. It’s just that historically that is typically the best way to access the capital markets for companies like ours. It is a very capital-intensive industry.

Q: What advice would you give to somebody else looking to start a business?

A: There’s nothing more rewarding than taking control of of your destiny. Just make sure you know what you think you know about whatever it is you’re going to start. I think you have to be wired a certain way to want to do something like this because it’s unbelievably difficult. I’ve been at this now for almost six years. When we get to a certain point, I’ll look back and feel really good about what we’ve done. We’re not there yet, but we’re getting close.

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Insider Q&A: Avelo Airlines CEO Andrew Levy describes the challenges of starting a new carrier

(AP Illustration/Jenni Sohn)

• Copy Link copied

It’s not easy to break into the U.S. airline industry, which is dominated by four big carriers and a sprinkling of other niche players, but that didn’t scare away Andrew Levy.

Neither did a pandemic that briefly caused air travel to plummet more than 90%.

In April 2021, while COVID-19 still raged and billions of dollars from taxpayers were propping up big airlines, Levy launched Avelo Airlines with flights between Burbank, California, and Las Vegas.

The airline saves money by flying older Boeing 737 jets that can be bought at relatively low prices. It operates out of less-crowded and less-costly secondary airports, and flies routes that are ignored by the big airlines.

Levy was involved in the launch of ValuJet, which became Allegiant Air, and he also did a stint as the chief financial officer of United Airlines before starting Avelo (it rhymes with yellow).

He spoke with The Associated Press about the challenges of starting a new airline, how the carrier is doing, and plans to sell shares to the public. The answers were edited for length and clarity.

Q: Why did you think you should start a new airline?

A: Shortly after I left Allegiant in 2014, I actually started thinking about about doing this. The market had become very consolidated, and there was a lot of opportunity that was out there that wasn’t being served by the existing, incumbent carriers. You have these four behemoths that are massive, that are protected by the government it seems, because certainly they’re stronger than they have ever been, after the pandemic. My view was we had room for more.

Q: What have you learned?

A: While there are these four behemoths, the toughest challenge, quite honestly, might even be the regulatory regime. For smaller companies like ours, it imposes these really substantial burdens on us. I’ll give you an example. For the (Department of Justice) lawsuit (against) JetBlue and Spirit, we had to go spend a ton of money on our end to produce documents for something that we really didn’t care how it ended up. And they’re trying to get us to do the same thing for Alaska-Hawaiian, which again, we could care less if Alaska and Hawaiian merge.

Q: How do you get people to fly on a new airline?

A: Number one, you have an awareness issue. You want people to know that you exist. So that’s one challenge, which is more of a marketing challenge. The other challenge is of course getting people to trust you. Like, ‘Who are these people? Are they going to really get me there? What’s the airplane going to look like? Is it safe? Is it reliable? What happens if something goes wrong?’ All those questions that most consumers may have when they think about choosing an airline that perhaps they’re unfamiliar with. You just have to focus on doing a really great job. Obviously not every flight is on time, but as time goes on I think people recognize that, hey, you know what? These guys offer a lot of value. We offer great convenience.

Q: Where does the name, Avelo, come from?

A: There’s no great story there. I wish I could tell you it was. It was a play on two words: velocity, which is swift in Latin, and convenience.

Q: Avelo reported a profit for fourth quarter 2023 but gave no details. Was that on a GAAP (generally accepted accounting principles) basis? And how much was it?

A: We actually have cash that generates interest income nowadays. Those are GAAP numbers where we have audited financials from Ernst & Young. These are real numbers with no adjustments or anything else. I’m not going to give you the numbers because we are a private company and so we have no real need to provide that kind of information. I’ll tell you that we made money in the first quarter as well.

Q: You’ve talked about your cost advantage as a startup. Is that sustainable?

A: Most costs creep up over time for every airline because our labor costs are tied to pay scales, but it is very sustainable. It’s based on how we designed the business. We distribute our product directly to the customer so we don’t use third-party intermediaries. We go in to smaller, more convenient, less-expensive airports. Your taxi times are lower; you’re not burning gas. We spend money on things that matter, and that includes our people. Our pilot pay is very competitive. It’s not the same as United Airlines, but it’s extremely competitive. We operate older equipment also — midlife (Boeing) 737 NGs, and those are certainly less expensive than brand-new aircraft. They burn a little bit more gas, but not much, and we like that trade.

Q: Do you plan to sell stock to the public, and when?

There’s obviously two issues. The single biggest one is one we don’t control, which is when are the IPO markets going to be actually open and vibrant, and they’re not right now. Beyond that, we have to be ready as a company. We put two straight quarters of profits ... so we expect every quarter this year to be profitable. We hope that we’ll have a company that people would want to own, and hopefully by year end or sometime next year. There’s no magic to being public for us. It’s just that historically that is typically the best way to access the capital markets for companies like ours. It is a very capital-intensive industry.

Q: What advice would you give to somebody else looking to start a business?

A: There’s nothing more rewarding than taking control of of your destiny. Just make sure you know what you think you know about whatever it is you’re going to start. I think you have to be wired a certain way to want to do something like this because it’s unbelievably difficult. I’ve been at this now for almost six years. When we get to a certain point, I’ll look back and feel really good about what we’ve done. We’re not there yet, but we’re getting close.

Here's the latest on Buc-ee's plans to build one of the world's largest gas stations in Wisconsin

It’s been about a year since Buc-ee’s revealed its plans for its first Wisconsin gas station and convenience store, which would be among the largest in the world.

Since then, news has been relatively quiet, but that doesn’t mean excitement isn’t lingering among Wisconsin residents hoping to find out what all the buzz is about.

The planned site in DeForest, near Madison, is northwest of the Interstate 39/90/94 and County V interchange. There are still hopes construction will start this summer. When it opens, it'll become a major hub for travel commerce.

In September, the Journal Sentinel detailed exactly why there’s so much buzz around the company’s plans. As we wrote then, “Everything is bigger in Texas – Buc-ee’s is, too.”

So here’s what to know about Buc-ee’s as we near a potential construction start date:

So, what is Buc-ee’s again?

The Texas chain's stores are, first and foremost, massive. The site for the planned location is around 74,000 square feet and will have 631 parking spaces.

It'll be a contender for the largest gas station in the world, which already happens to also be a Buc-ee’s. Compared to ubiquitous Kwik Trip, Buc-ee’s is about the size of eight combined.

More than that, Buc-ee’s is known for its popular mascot, a beaver named Bucky; its wide range of snacks; and very clean bathrooms. Check out our prior breakdown of the store — from a native Texan, to boot — for the full rundown of what makes this place so popular.

It’s worth noting that the Wisconsin location is quite expensive, too, with a projected cost of $20 million.

Why is Buc-ee's planning a location in DeForest, Wisconsin?

While the company hasn’t explicitly said why it picked the interchange for its location, there are some details that offer solid hints.

It’s about 39 miles from the Wisconsin Dells, a very popular tourism hub in the state, and near the intersection of three major interstates. In fact, that interchange had an average daily traffic count of 59,000 cars in 2023, per the data from the Wisconsin Department of Transportation.

When will the Buc-ee’s in Wisconsin open?

The Journal Sentinel first reported on Buc-ee’s Wisconsin plans in August 2023. A that time, the company hoped to receive final approval in the fall and had received a conditional use permit in March 2023.

As of April, the company had not yet submitted for site plan review and approval, said Alex Allon, DeForest's community development director, in an email.

As for when it would begin construction or open, that’s still up in the air. The company can “hopefully” start building this summer, said Jeff Nadalo, Buc-ee’s general counsel, in a March email. In April, he said there were no new updates on the project.

Could there be more Buc-ee's in Wisconsin?

We can’t give a clear answer here, either. However, Nadalo said they “are interested in additional locations in WI, though we do (not) have any confirmed projects to announce.”

Isn’t Kwik Trip competing with Buc-ee’s nearby?

Sort of, but not exactly. Let us explain.

In late March, the Journal Sentinel reported that Kwik Trip bought 151 acres in Dane County for a new distribution center. That building is planned for the southwest quadrant of the intersection between U.S. 51 and State 19 and cost Kwik Trip $14.1 million, according to the Wisconsin State Journal.

Sixty of those acres are planned to develop into a satellite distribution center and fleet services center, DeForest village administrator Bill Chang said. Between the two, the facilities will serve 350 Kwik Trip stores in southern Wisconsin and bring about 400 jobs to the area.

That project is scheduled to take at least a year and a half, with construction starting this spring or summer.

Now, back to how that plays into Buc-ee’s. The proposed Kwik Trip site is about 10 minutes away from the proposed Buc-ee's site. Chang said the plans by both companies should have zero effect on one another.

What is Sling TV?

How much is sling tv.

• What channels can you stream?
• Is there a free plan?
• What devices are supported?

What is Sling TV like to use?

Is sling tv worth it, the bottom line, sling tv review: essential cable channels for cord-cutters on a budget.

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Sling TV is one of the best live TV streaming services you can sign up for without breaking the bank. With plans starting at $40 a month, it's an excellent midrange option with a healthy assortment of popular channels and features that cord-cutters crave. 

But Sling isn't the only live TV option out there, and there are some areas where it falls behind more expensive services. To help you decide if Sling TV is the right choice for you and your household, we've broken down everything you need to know, including our thoughts on what it's like to use and how it stacks up to its main competitors.

For just the essentials without any extra fluff, Sling TV is the streaming service you're looking for. It's more customizable than other plans, with three options you can choose from, so you pay for only what you need. New members get their first month for $25 off.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Two affordable base plans to choose from
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Options with sports or local networks
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Up to three simultaneous streams
• con icon Two crossed lines that form an 'X'. Certain channels are exclusive to Orange or Blue
• con icon Two crossed lines that form an 'X'. Gets pricey once you start adding extra channel packages
• con icon Two crossed lines that form an 'X'. Local channels limited to select cities and no option to get CBS

Sling is a live TV streaming service that offers access to many popular cable and satellite channels via an internet connection. That means no bulky cable boxes or tricky contracts, and you can get Sling for a fraction of the cost of most traditional pay-TV providers. 

The service offers two primary plans geared toward different types of programming: Sling Orange leans toward sports, and Sling Blue toward news and entertainment. You can also combine both plans to get access to all of their channels, and there are add-on packages you can buy to unlock even more networks and premium stations, like Starz and Showtime.

Sling TV offers three primary plans, with prices starting at $40 a month. All Sling plans include 50 hours of DVR storage, but members can pay $5 a month extra to unlock DVR Plus with 200 hours. 

Here's how much each of Sling TV's three main plans cost:

*Sling Blue and Orange + Blue pricing and total channel offerings vary depending on location. Local NBC, Fox, and ABC stations are only available in select cities. Members must pay an extra $5 in areas that include all three local stations.

What channels come with Sling TV?

Both Sling Orange and Blue start with the same selection of 25 channels, including popular cable networks like CNN, HGTV, Food Network, and more. But in addition to this base lineup, each plan has its own unique assortment of additional channels.

Orange has seven exclusive sports and family channels, including ESPN, Disney Channel, and Freeform. Meanwhile, Blue has 17 exclusive news and entertainment channels, including Discovery Channel and TLC, and local stations from ABC, Fox, and NBC in supported markets. On the downside, there is no option to stream your local CBS channel. 

Sling TV also offers several add-on packages that you can purchase for an additional cost to unlock even more channels. Bundles like Sports Extra, Entertainment Extra, News Extra, and Kids Extra cost an extra $6 to $11 a month, each including anywhere from six to 14 additional channels. The Sports Extra add-on, for example, includes ESPNU, MLB Network, NBA TV, and more for $11 a month.

Many of these extra channels are included with base offerings from more expensive competitors like YouTube TV , Hulu + Live TV , and Fubo , but some viewers may prefer how Sling TV lets you save money by offering these networks as optional add-ons.

Check out our Sling TV channels guide for a full breakdown of networks and features included with each plan and add-on.

Does Sling TV offer a free plan?

Sling TV does offer a free streaming option called "Freestream" that anyone can watch without an account. Though this plan does not include any traditional cable or local networks, it does feature access to over 400 ad-supported live internet TV channels. 

Some of these stations are offshoots of major networks that broadcast select content from their libraries. For instance, you can watch channels like AMC Thrillers and VH1 I Love Reality.

These free internet channels aren't a substitute for true cable or satellite TV offerings, but they're a nice option for cord-cutters who aren't ready to commit to a paid subscription.

How do I stream Sling TV?

The Sling TV app is supported on several media players and mobile products, including all of the best streaming devices from Apple, Roku, Fire TV, and Chromecast, as well as iOS and Android phones, Xbox Series X|S, web browsers, and more. The app is also available directly through many of the best TVs from brands like Samsung, LG, Sony, Hisense, Vizio, and TCL. 

Check out a full list of every supported device on the Sling website .

After testing Sling on a web browser, smart TV, and Roku Ultra, we found the service to be intuitive and easy to use, an important characteristic for subscribers making the switch from cable. In our experience, streaming is stable and without interruption, but your results may differ based on your network connection quality. 

Sling's interface lets you access a traditional channel guide where you can sort channels by their name or genre, and you can see which networks you've most recently watched. Once you choose a program and start watching live TV, you can press down on your remote to toggle an overlay on the bottom of the screen, which lets you see details about the program or jump into other content. 

You can also press up on your remote to easily return to the full-screen guide from any live channel. The program you were watching keeps playing on a small pop-up screen in the lower right corner until you select another channel.

Outside the guide, Sling has a menu on the left side of the screen that lets you access a homepage with content recommendations, your DVR recordings, on-demand content, and settings. This is all simple to navigate, and there are no glaring omissions. 

Sling is an excellent live TV streaming option for viewers who don't want to spend much money but still want more than the bare minimum. It lacks some perks that come with Hulu's pricier live TV service, like unlimited DVR and a complimentary Disney Plus subscription, but it includes some key networks that cheaper services, like Philo , are missing.

One of Sling's most attractive features is how it lets you choose between two affordable base plans to keep costs low. If you don't care about watching sports on ESPN networks, opting for Sling Blue at only $40 a month saves you a great deal of money compared to signing up for a service like Fubo, which costs double the price and forces you to pay for channels you might not want. Sling Blue even includes local channels in big cities, which is something that Philo's less expensive service lacks.  

However, if you're looking for a live TV streaming solution to suit a big household with varied viewing needs, Sling may not be for you. Though you can customize a comprehensive plan with options for many different tastes by subscribing to Sling Orange + Blue and tacking on packages like the Sports Extra plan and DVR Plus, the cost adds up quickly. To get a fully inclusive Sling TV package with a channel selection and set of features that rivals Hulu + Live TV or YouTube TV's base offerings, you'll end up paying about the same or, in some cases, even more than those services charge.

Sling is ultimately best for people who just want an Orange or Blue plan to get the essentials of cable TV but don't want to pay extra for all the other channels that come with more expensive services.

Starting at $40 a month, Sling TV is a competitive option for subscribers who want an affordable live TV streaming service that provides popular news, sports, entertainment, and family programming. 

It's considerably cheaper than most competing live TV streaming services, and it offers more sports and news channels than Philo, Sling's top budget competitor. Though Philo is even cheaper at just $25 a month, Sling has plans that include stations like ESPN, NFL Network, CNN, ABC, NBC, and Fox, which are all missing from Philo.  

Ultimately, Sling TV cements itself as a unique midrange option that rests between Philo's true budget pricing and the more common $65-$75 starting prices of other live TV services. Options like Hulu + Live TV remain a better fit for people willing to pay more for additional channels and extra perks like unlimited DVR, but in an age of rising prices, Sling TV's lower costs provide a nice streaming solution for first-time cord cutters switching over from cable or satellite TV.

You can purchase logo and accolade licensing to this story here . Disclosure: Written and researched by the Insider Reviews team. We highlight products and services you might find interesting. If you buy them, we may get a small share of the revenue from the sale from our partners. We may receive products free of charge from manufacturers to test. This does not drive our decision as to whether or not a product is featured or recommended. We operate independently from our advertising team. We welcome your feedback. Email us at [email protected] .

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The small business guide to surviving soaring costs.

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Money is flying away by the inflation bubble and employees trying to prevent it. (Used clipping ... [+] mask)

It is an understatement to say that small businesses, with their remarkable resilience, have been on a wild ride since 2020. From the pandemic to significant supply chain disruptions to dramatic increases in inflation, they have navigated with precision and ingenuity, inspiring admiration for their survival.

With labor shortages and high prices, it's not just a good idea but a necessity for small businesses to operate as lean as possible. Since small businesses often operate with a razor-thin margin, it's crucial to learn how to create bigger buffers in cash flow.

Applying lean management principles will help small business owners create more value for their customers with fewer resources.

We will focus on the first three lean principles to implement

Defining Value

The value of anything in the marketplace relies on consumer demand. What is a consumer willing to spend on your product or service? When the economy gets tight, and there are dramatic changes in other areas of a consumer's life, that's when the first economic principle kicks in. People make tradeoffs. When things get tight for consumers, they turn a critical eye to what they spend money on and if it's still worth it for them to do so. The problem? What the consumer cuts may very well be your product or service out of their spending budget.

WhatsApp Brand New iPhone Feature Just Launched That s Much Easier To Use

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As a small business owner, part of your job is anticipating consumers' reactions to economic changes. To gauge whether your product or service will survive, you should take a scalpel to your business and ask yourself questions like: Are our customers getting what they need? Are we delivering what we promise in a timely way? Have our customers' buying habits changed for the product or service that we offer? Are there any other product or service types that we can add that make our core offering of higher value?

86% of customers state that good customer service turns them from one-time shoppers to lifelong brand champions. There is nothing more crucially important during times of economic downturn than having consumers who are brand champions; they will be loyal.

Value Stream Mapping

Although this type of mapping is largely used in manufacturing operations, its principles will work when you are trying to visualize how all of the pieces of your operation will function together. Visualizing how you deliver your product or service will help you eliminate bottlenecks and tension points.

You don't have to spend 1,000 hours on VSM. Simply map out how you see your business delivering your product or service from beginning to end and include the employee functions as well. You want to build a simple visual of the current state, ideal state, and future state visuals to help you understand how you are delivering value today, what your perfect delivery system would look like, and what the future of your operation looks like when all components run smoothly.

Create Work Flow

Now that you have mapped out how everything is functioning, how you would like it to function, and what the future of your business looks like, you can work on the specific workflow that goes from one process to another.

This is important because business inefficiencies cost money. It is estimated that 20% to 30% of revenue loss in business operations is due to inefficiencies annually.

When money is tight for consumers, you can't afford to not deliver on your promises, and you certainly can't afford to lose money because your business operation needs to function correctly.

Whenever the economy is unstable, it helps to have a plan and ensure that you can run a business that is a revenue-generating machine that continues to deliver value to your customers.

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