Average cost of starting a small business – Natural Self Esteem

Starting a business and being your own boss is a dream many Americans are chasing. But while it’s free to dream of starting a business, actually starting and growing a business takes time and money.

While your initial start-up costs will depend on the type of business and industry you are entering, there are many expenses that you and your budget must consider. From legal fees and licensing to marketing, warehousing and labor, here’s what you and your wallet can expect when you decide to become your own boss.

Start-up costs for small businesses

The average hourly wage for an administrative assistant is $17 per hour.

You can expect an upfront cost of around $200 to build a basic website on a platform with built-in templates, with ongoing costs of around $50 per month to maintain your site.

Adding a new employee to your payroll will typically cost you 1.25 to 1.4 times the salary you pay that employee after you factor in labor, insurance, and tax costs.

Average cost by industry

Your average startup cost will vary widely depending on the area or industry you’re trying to enter. Your industry determines your overall business model, inventory needs, marketing strategy, and cost of producing your goods or services. Here’s a closer look at some industry averages:

*Averages from RestaurantOwner.com and Starter Story

How much does it cost to start a small business?

Industry averages can help you get a general idea of ​​how much to expect when starting a small business. However, your actual costs will vary based on the size of your business, whether you have a physical or online location, number of employees, cost of producing goods, and more.

Often your location and the amount of inventory you need play a large part in how much you pay to produce your goods at the required scale. As your business grows, you need to be strategic to keep your costs down and ensure you choose the cheapest materials to get the greatest return.

costs to consider

While some start-up costs, like your space deposit, are fixed, others like your taxes, payroll, or legal fees can fluctuate from year to year. In this case, an organized budgeting system can help you plan for those expenses and account for any changes that might come your way. Here you can see how much you are likely to spend on your fixed and variable costs.

This is how you save on these costs

Some of these averages may scare you, but many business owners take advantage of US Small Business Administration (SBA) soft loans and small business credit cards to help pay for their start-up expenses until they’re profitable and can cover the expenses of their own.

If you decide to go this route, you must meet a few requirements. According to the SBA, eligibility for a loan requires that you are a for-profit business, doing business in the US, have equity invested, and have exhausted your financing options. Consider applying for a business credit card to help cover your costs, and they usually have fewer eligibility requirements.

You might also consider cutting your overheads to make your startup costs a little more manageable. Starting an online business is a way to reduce or eliminate office space, insurance costs, and save a little more while getting your business off the ground.

FAQs on starting a small business

How do you calculate the start-up costs?

The first step in starting a business is figuring out how much it will cost you to run it. Once you have decided what business you want to start, you need to calculate what your profits could be and how they will grow over time. Start by conducting a break-even analysis to determine when your business will become profitable. Secure the financing you may need, then calculate what that loan will cost you in interest over time. Attract investors who may be able to provide you with large sums of capital up front and determine what the tax implications of starting your business will be. The SBA can help you work out the numbers and get an estimate.

What do I need before I start spending money on a startup business?

You need a business plan and a way to raise capital. Once you’ve decided what your business is going to be, you need a plan for how you’re going to raise the money to fund your startup expenses, and then a plan for how you’re going to invest those dollars to get the maximum return. If you need help, the SBA can help you find free consultants to walk you through every step.

What are additional considerations?

If you’re going solo, it’s important that you understand the tax burden that comes with owning your own business so you don’t get any big financial surprises down the road. Consider hiring a tax professional who can ensure you are aware of all the taxes and fees that you are responsible for.

The final result

Starting your own business can be incredibly rewarding, but to keep your costs low and your profits high requires thorough pre-planning. This includes understanding how much of your own money to contribute, how to raise additional capital, and where to cut costs to ease the financial burden. Once you know how much you need to get started, you can put together a strategy to understand how to get the highest return on that initial investment and run a profitable business.

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