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10 Start-up Costs Every Small Business Should Know About

10 Start-up Costs Every Small Business Should Know About

Learn the ins and outs of start-up costs, including the 10 most common expenses and overheads. Plus, discover the first step to setting up your business.


As the old saying goes, “You have to spend money to make money” — no one knows this more acutely than entrepreneurs and solopreneurs. Thanks to the many start-up costs on the journey to the grand opening, fundraising is essential to start a new business.  

Most experienced entrepreneurs know what costs to expect from their start-up ventures. But if you’re a new business owner, some start-up expenses can leave you with sticker shock — or worse, hinder your entry into the business world. 

Here’s what you need to know about start-up costs and additional expenses.

Creating a business plan for your start-up

The start-up business plan is a crucial first step for any entrepreneur. Creating this plan helps you evaluate every aspect of your new company, ranging from your target demographic to your expected net profit. Reviewing start-up costs is an essential part of this process, as it gives you a clear picture of your business launch expenses.

Most common business start-up costs

While business plans vary from endeavor to endeavor, some start-up costs should appear on nearly every budget. Here are a few start-up cost examples:

Incorporation fees

Entrepreneurs can use five business structures for their start-ups: sole proprietorships, partnerships, C corporations, S corporations, and limited liability companies (LLCs). All these structures — except sole proprietorships — require an incorporation certificate for the secretary of state. This means business owners must budget for a filing fee ($100–$250), depending on the state where they’re filing. 

Research expenses

Even the world’s most brilliant entrepreneurs won’t have a successful small business if they target the wrong market. Therefore, it’s common practice for new companies to hire market research firms to help them find the right audience for their start-up. This is a variable expense, as the total depends on your business’ size and the firm you hire. Market research can cost anywhere from $10,000 to $100,000, so allocate plenty of room for it in your budget. 

Borrowing costs

It takes money to make money, and it also takes money to borrow it. Many people leverage a business loan to get their venture off the ground but aren’t always aware of the loan’s associated costs. These can include origination fees, underwriting fees, closing costs, and more — not to mention the 5.11%–10.46% interest rate. 

Office space and equipment

Once you acquire funds, it’s time to find — and pay for — a place to work. Office space accounts for a large part of your budget, and the cost varies depending on the location. For example, an online business may not need a physical office, while a brick-and-mortar store may pay a hefty rent every month. Luckily, rent is often a fixed expense, so budgeting for it each month is easy. 

And the perfect office space isn’t the only thing you’ll need –– you also need to fill the space with office supplies and equipment. Again, your equipment costs will vary based on your industry and business needs, but these costs can range from $10,000 to $125,000.


You can choose the products you make, sell, or distribute –– one of the many perks of running a small business. But you also have to pay for all that inventory. And inventory is another variable expense that depends on your industry and company size. Still, a good rule is to allocate 17%–25% of your business’ total budget to inventory-related costs. 

Marketing and advertising

You have a business license, a space, and plenty of inventory — how do you get customers through your door? Now’s the time to consider your advertising expenses, including direct mailers, store signage, business cards, and digital items like online ads, influencer partnerships, or email blasts.

 Thanks to free advertising on social media platforms, marketing can be a tiny part of your budget. However, you should still designate up to 10% of your budget to these expenses. Remember to assess your team’s skills when deciding on marketing costs. Sometimes hiring a professional is a better choice than doing your own marketing. 

Web development

Today’s businesses need to have attractive and user-friendly websites to operate successfully. But how do you get one for your organization? There are a few different options, each with a different cost. You could build your website through a service like Wix or Squarespace, which offer free memberships or premium plans with monthly subscription costs ($5–$39 a month, depending on the service). Or, you can hire a professional web developer who’ll charge a one-time fee for their work or a monthly cost for ongoing site maintenance. Once again, your choice will depend on your team’s skills.


Speaking of “your team,” let’s discuss employee salaries. You must fulfill each employee’s pay, even in your business’ early stages. Plan to spend 25%–50% of your total budget on salary, commissions, and PTO costs.


Business insurance is a vital part of any start-up business plan. It protects your employees, property, and assets. Here are a few business insurance policies to consider:

  • General liability insurance (GLI): This protects your business from claims related to bodily injury, property damage, or personal injury.
  • Commercial property insurance: This safeguards your office space and equipment.
  • Business income insurance: This helps replace lost income if property damage prevents you from working.
  • Professional liability insurance: This policy saves your business from claims against critical errors. 
  • Workers’ compensation: This benefits your employees if they suffer an injury on the job.
  • Data breach insurance: This policy helps your business respond appropriately to a data breach.

You can choose between these types of insurance or even buy multiple policies. But it’s important to remember that multiple insurance policies will incur a higher monthly cost as premium expenses increase. 


Finally, it’s time to discuss the funds due to the Internal Revenue Service (IRS). You must pay taxes based on your revenue at a federal income tax rate of 21%. But if you’re new to the business world and possess no knowledge about taxes, speak to a certified public accountant (CPA) who can look at your unique situation and help you determine how much of your budget you should set aside for start-up taxes (and where you can find a deductible or two).


Additional considerations on start-up expenses

The expenses listed here are costs even new business owners typically expect. We all know that we need to pay rent, build a website, and pay taxes, so making room for them in the business budget makes sense. But what about extra expenses like equipment maintenance, shrinkage costs, or sky-high internet bills? You can plan for these by budgeting in a cushion of about 3–6 months of operating expenses. If you don’t set aside a rainy day fund, you’ll have a high balance on your business credit card.

Manage your business with Practice

Starting a new business is exciting but requires careful planning and budgeting. And no matter how many books you read, conferences you attend, or even how many businesses you start, it always helps to have the right team and tools by your side. 

Practice can help you manage your invoices, schedule, customer service, and more all on one easy-to-use platform. Check out our Client Management Software to see how Practice can help you manage your business more effectively. Try it today.

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