So, you’ve got a brilliant business idea and want to start your own company. You’ve probably heard the saying, “It takes money to make money.” If you’re planning on opening a new business, that’s certainly the case!

In this blog, let’s talk about what business startup costs look like and what you should plan to invest when you launch your own company.

Startup Costs for Small Business Owners

Full transparency: Calculating startup costs is going to look different depending on the specific business and you, the business owner. We’re going to focus on common business startup costs that apply to just about all of us, so you’ll want to plan ahead for them.

For now, we’re going to keep this high level and not get too in the weeds.

1. Location + Physical Space (If Applicable)

One of the biggest expenses incurred by most business owners is the physical location, if you have one. If this is you, consider monthly rent, any associated taxes, insurance, permits, and utility costs. Will you need to pay for parking? Is there a security deposit?

What will you need to pay monthly? Are there any yearly fees? These business startup costs aren’t a one-time thing and they’re certainly not minor. Plan ahead!

If you don’t have an office, then there are definitely a number of business expenses and overhead costs that you’re going to avoid.

2. Your Offerings

Translation: What is your small business planning on selling?

If you’re selling physical goods, then there’s the investment in the inventory. How much do you need? Does the vendor/supplier have a minimum order quantity? Do you pay extra for packaging, branding, or shipping? Additionally, where are you going to store this inventory — in your office space, at home, or in a separate storage unit?

What about services? True, selling services means that you’re not spending money on physical goods. However, there might still be related costs paid. For example, if your service requires you to get in the car and drive somewhere, that costs money (and time). Think about the vehicle you’re going to use, the gas, and the wear and tear on your car.

3. Payroll Costs

Payroll is another huge investment for small business owners. Do you have employees? What are you paying them, and what benefits does their employment include — health insurance? A retirement plan? What do payroll taxes look like?

If you’re relying on contractors or freelancers, the details will change. For instance, these professionals don’t typically receive any sort of benefits. Be sure you keep track of what you’re paying them!

Keep in mind, too, that the types of workers you hire could affect the type of insurance you need. There are a lot of variables and moving parts to think about. The Small Business Administration is a great resource if you need to learn more about securing business insurance.

Hiring a tax professional, if you can afford it, is another smart move here. Tax preparation can be a maze, and they’ll ensure that you’re not only doing things the right way but also that you’re accounting for any and all tax deductions, which reduces your taxable income.

4. Marketing and Advertising Costs

Especially if you’re a new business, you can expect the market research expenses, marketing expenses, and advertising costs to be a bit steeper. This is normal! You need a way to get in front of people who have never heard of you before.

Are you going to be running ads on social media? Are you hiring someone to manage your TikTok account? Are you putting money toward PPC campaigns? Are you going to print brochures and other collateral to keep in your office or retail space?

Small businesses are often caught off-guard — these expenses add up quickly! Don’t let them surprise you.

5. Software

Whether you purchase or make your own software, these should be accounted for in your business startup costs.

Do you plan on using a social media management tool or accounting software? Do you use an automated tool to run payroll or manage your email marketing?

These tools often have a monthly subscription price, or perhaps you pay yearly. Many times, when you commit for a year, the software will offer a discount. If you don’t see this option, ask for it! Many brands are happy to give you a deal when you commit to working with them for a longer period of time.

When you calculate startup costs, don’t forget these.

6. Equipment and Supplies

Again, these startup costs are going to look different depending on the small business. Especially if your new business has an office space and employees, you’re going to want to consider things like computers, printers, desks, chairs, kitchen supplies, bathroom supplies, and so on.

And even if your office space is right at home, your startup costs might still very well include items like a printer, paper, a new monitor, and a better computer chair.

7. Third-party Professionals

Earlier, we mentioned hiring a professional to manage your business taxes. There might be other people you rely on to help you keep the lights on at your business startup. For instance, if you don’t want to manage your financials, you might decide to hire a bookkeeper. You may choose to pay a lawyer to address confusing legal needs. While legal fees can feel daunting, these folks can also help protect you, your business, and your team.

Some professionals might invoice you by the hour, while others work on retainers. Find out in advance what these startup costs look like, because they can get pricey (but save you a ton of time and headaches!).

If a lack of funding requires you to go the DIY route, that’s okay. If you’re in a place where you can afford these professional services, I highly recommend that you at least consider them.

Putting it All Together

Once you’ve made a list of what you believe will be your startup costs and other business expenses, ask yourself (1) what do I owe, (2) when do I owe it, and (3) are these fixed costs or will they fluctuate?

Fixed costs can include rent and software. You pay the same every month no matter what’s going on in your business. You likely owe the same amount by the same date, making it easy to plan for these startup expenses in advance.

Your business license will be another one of your fixed expenses, although these are typically renewed annually.

Other startup expenses might be ongoing and can also fluctuate. For example, the money that your small business is putting into Facebook ads can vary, and you might pay for these ads at seemingly random times. Regardless, you should still have at least a rough idea of how much capital you need to dedicate to these variable costs on a monthly or quarterly basis. Define your marketing budget and what you hope to get out of it.

I know how intimidating startup costs can feel, especially if you’re a new business that’s not yet generating a ton of revenue. It can be tempting to cut corners and try to do things for as cheap as possible. Without a doubt, being frugal can come in handy. Other times, investing is the smartest choice.

You might experience a heavy initial investment but do keep in mind that some expenses incurred won’t come up very often. For instance, you might be spending a ton of money on computers in the beginning, but you’re not going to be purchasing these all that often.

After those initial startup costs, it’s more so the recurring expenses you need to consider, and what type of cash flow you’ll need to keep your business afloat and, ideally, skyrocketing to new heights.