Friday Dec 02, 2022

Business Startup Costs: How To Calculate And Budget – Forbes

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Starting a business comes with a variety of costs, which may require you to seek external business financing. In fact, entrepreneurs file millions of business applications every year in the U.S. The number of new business applications surged to a record 4.5 million in 2020, according to the Economic Innovation Group.

If you’re working to get your own business up and running, it’s crucial to understand the different costs you might encounter. Knowing potential business startup costs upfront makes you better prepared as an entrepreneur and can improve your odds of success.

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How to Calculate the Cost of Starting a Business

There’s no set cost to start a business—many factors can impact your initial startup expenses. In some cases, you might be able to get a company off the ground with a few thousand dollars. Other small business owners might need to come up with five figures (perhaps several times over) during their first year in operation.

With such a wide range of potential expenses, it’s helpful to start with a business plan. A separate startup cost analysis can help you estimate your costs as well. The U.S. Small Business Administration (SBA) provides free guidance and sample worksheets you can use for both.

Taking the time to write out (and add up) your initial startup costs is a smart move. This extra preparation on the front end can lead to more realistic expectations and better long-term results for your new business endeavor.

Common Business Startup Costs

Go through the common business startup costs below to determine which expenses your business might encounter.

Incorporation Fees ($145)

One of the first tasks you’ll need to complete when you form a new business is choosing a business entity. General business structure choices include:

The average cost to register a business is $145. However, filing fees and other associated costs can differ based on the state where you operate.

Research Expenses ($100–$30,000+)

Researching the market you plan to enter puts your business in a better position to succeed. Some entrepreneurs attempt to do this research on their own. However, hiring a professional market research firm could give you a clearer picture of the industry, your target customers and your competition.

The price of market research can vary depending on the type of report and guidance you require. High-level market overviews might cost a few hundred to a few thousand dollars. A more detailed and personalized project by comparison could cost at least $30,000.

Equipment ($11,000–$125,000)

Regardless of your type of business, it probably needs some type of equipment to operate. Even online microbusinesses need access to a computer or device and an internet connection. Other types of businesses may have much more demanding equipment needs that could cost tens or even hundreds of thousands of dollars.

Below is a look at sample startup equipment costs for several different types of industries. (Your experience could be different.)

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