Startup Costs: How Much You Need To Launch Your Small Business
A successful entrepreneurship opportunity begins with a powerful idea and clear vision. But actually launching your small business takes a little more time, planning, and funds.
In this blog, we take a deep dive into the funds part of the equation.
Before you start planning much else, you need to calculate an initial estimate of the money it would take to get your business up and running. To help with your calculations we’ve compiled a list of typical small business startup costs.
Costs to start a small business
There are 12 small business startup costs you’ll want to consider:
1. Facility expenses
The type of building your small business requires will depend on the nature of your product or services. If your services are offered primarily online, you will still probably want a dedicated office space. On the other hand, if you are in the retail or restaurant industry, you will need to find a strategically located space to open up shop.
How much will a business facility cost you?
It could be anywhere between $5 and $60 (possibly even more) per square foot per month. The exact amount you need for your space will depend on several factors…
-
Whether you rent or buy
-
The current business real estate market in your area
-
The type of space you need
-
The size and location of the space you want to use
-
How many employees you will have
To minimize your initial facility costs, consider starting by working from home or using a co-working space.
2. Supplies & equipment
Once you have a space, the next step is to fill it with all the equipment, furniture, technology, and supplies you need to run your business. Think about what you will need for each stage of the business process – from production to background digital process management. You can even lease equipment instead of buying it, which can save you some money in the short term.
The price range for the equipment and supplies you’ll need is wide.
Depending on your industry and scale, you could be looking at an amount in the hundreds or the thousands. Some small business owners may be able to conduct business entirely from a single computer. Others may need commercial grade equipment – say if they are opening up a restaurant or offering general contracting services.
3. Utilities
And don’t forget about all utilities necessary to keep your customers and employees safe and comfortable. It’s just like owning a home. You’ll want to think about energy, water, and all other basic utility expenses. And don’t forget about security! The average monthly cost for commercial utilities lands somewhere around $2 per square foot of your building.
4. Permits, licenses, & taxes
When you incorporate your small business or make it a limited liability company, you’ll have to pay some small fees. And in some industries – such as agriculture, retail, and consulting – you may need to obtain certain state or federal licenses or permits before you can legally begin business operations.
Not sure whether you need a license? Here’s a list of North Carolina’s required business and occupational licenses.
And don’t forget about your local, state, and federal taxes! You’ll need to pay corporate income taxes, property taxes, sales taxes, franchise taxes, social security, and medicare taxes.
5. Initial inventory
This is a big one – but only for business in the retail sector. Before you start promoting your business, you must have something to sell!
Getting the startup inventory amount right can be difficult. You don’t want too much of a product, or you’ll risk losing substantial money if it’s not a hit with your customers. But you don’t want so little that you miss out on potential sales.
It’s certainly tempting to err on the side of caution when it comes to your starting inventory. But if your product doesn't spoil too quickly, consider stocking up generously.
6. A company website
In this day and age, every business needs a good easy-to-use website to bring in new customers – whether you have a physical storefront or operate completely online.
You have several options here.
You could create a basic website yourself through a platform like Wix or Squarespace. Or, for a more robust, custom-built website, you could hire a web design agency to build a website for you.
And don’t forget to budget for monthly website hosting. While those DIY web design platforms often have website hosting built into their monthly cost, this may not be the case if your website is professionally designed.
7. Marketing & advertising
Somehow, the word has got to get out about your new small business.
Whether you manage your marketing and advertising in-house or outsource the work to a local marketing firm, it’s important to save at least a little bit of money to promote your business early on. To be effective, you’ll probably want to spend around 10% of your budget here.
NOTE: You may wish to invest some time and money into initial market research to ensure you get a handle on your target market and competition.
8. Employee payroll
Odds are, you’ll need to hire at least a couple of employees, even in these early stages. To attract high quality workers, it’s important to offer competitive salaries and benefits.
Reasonably, payroll is often one of the most overwhelming startup expenses. It can make up as much as 50% of your overall budget! As a general rule of thumb, each employee typically costs about 1.25 times their salary. To determine how much you need to pay your employees, look at other job postings for the same positions in the area.
The average salary in Fayetteville, NC is just over $48,000. However, you most likely won’t need to pay your employees quite that much – at least in the beginning.
9. Business insurance
Businesses are legally required to have certain liability insurance policies to protect against unforeseen events like workplace accidents or property fires. In addition to general liability insurance, you may need to get workers’ compensation insurance, commercial property insurance, business income coverage, and errors and omissions insurance, to name a few.
10. An accountant
Keeping track of all of your small business taxes can be complex. And let’s be honest…unless the business you’re opening is an accounting firm, you probably don’t have the time or desire to deal with your business taxes yourself. If this is the case, you’ll need to hire an accountant. A certified public accountant (CPA) can also help you make sure you comply with all that’s required of you as an employer and provide any additional financial advice.
11. A lawyer
It’s also a good idea to form a relationship early on with an attorney. Consulting with a business lawyer can prevent major issues with trademark, liability, and contracts.
Fayetteville-Cumberland Regional Entrepreneur & Business HUB – Small Business Resources
Need help calculating your initial business costs?
We have resources to help! The Fayetteville-Cumberland Regional Entrepreneur & Business HUB team offers an array of useful consultation services for small businesses in the following North Carolina counties:
-
Bladen County
-
Columbus County
-
Cumberland County
-
Harnett County
-
Hoke County
-
Moore County
-
Richmond County
-
Robeson County
-
Sampson County
-
Scotland County
Learn how we can help you launch your small business
READ MORE: