How to Calculate Your Small Business Startup Costs

ByNaftali FeigAug. 06, 2020

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Calculate the costs of starting your business
How much money will it take to start your new business? Many entrepreneurs underestimate the cost of starting their business, but with the right numbers you can attract investors, get bank funding, spend in the right places, and know when to expect a profit out of your hard work.

If you've already done research on how to get started, what your market looks like and what you plan to do with your business, now's the time to figure out how much it will cost and how you’re going to pay for it.  Every business requires spending before even opening the doors on the first day.  Along with these expenses, you need to estimate your ongoing costs of operation. Cost estimates will be your basis for setting prices and rates, analyzing your profitability, and applying for loans, so it's important not to overlook anything.

The Top Lenders at a Glance

Minimum Credit Score Time Until Funding Visit Site
Lendio 500
As little as 24 hoursView Rates
Fundera 680
2 days to 2 weeks depending on the lender View Rates
OnDeck 600
As fast as 24 hours View Rates

Take a look at the top 10 business loan lenders >>

Know Your Initial Costs

Your startup costs are purchases you make and fees you pay to get your business up and running. You'll encounter different costs depending on what type of business you're running. Brick-and-mortar stores are very different than service providers or online stores, so talk to others in the industry for their experiences. There are several types of small business costs:

  • One-time costs, like down-payments, office equipment and furnishings, and building a website
  • Ongoing costs include payments you have to address on a regular basis, like rent, loan payments, utilities, and salaries
  • Variable costs, such as emergency repairs, marketing campaigns, and legal fees

Once you have a list of what you expect to spend money on,  do your best to find out how much these things actually cost. Some expenses, like rent, will be easy to determine, but you may have to estimate some other costs. Look online and keep communication open with other people working in your industry. 

Understand Your Assets

An asset is a tangible resource belonging to your business that still has value after a year or more. Some assets increase in value over time and some decrease over time, and most require an initial investment.

Examples of assets include:

  • Cash: The money your business has in the bank, usually representing the owner's personal investment in the company
  • Land and buildings: Any property the business owns and from which it operates
  • Improvements: Money spent fixing up the location, such as painting, putting in new flooring, repaving the parking lot, or doing interior redecorating
  • Office furniture: Desks, tables, chairs, shelving, and small appliances fall into this category
  • Equipment: These costs vary depending on the type of business you’re starting. For example, operating a restaurant requires investing in more large equipment than running a retail store.
  • Starting inventory: If your business sells a product, you should include the money you need to spend on stocking your initial inventory.

Money brought into the business by investors or through loans also counts as an asset. However, since you have to make payments on these sources of financing, they also count as expenses and should be categorized along with similar types of payments. Knowing what assets your business already has can make it easier to take out a business loan or pitch to investors later in the game. Once you're up an running, it can be wise to get an appraisal of your assets for lenders who will want to see that you have the means to put down collateral. 

The 3 Best Lenders for Small Businesses

1. Lendio


  • 10 different loan types
  • No minimum credit score    

Lendio is an online small business loan aggregator that brings business owners and lenders together on one platform. The site is free to use, and offers at over ten distinct loan programs, for every business need, from business acquisition to funding for commercial real estate, increasing your changes to find both a lender and a specific loan program that suits your needs.    

Read the full Lendio review >>

Lendio Lendio View Rates

2. Fundera


  • Keeps information private, even from lenders
  • Highly acclaimed

Founded as an alternative to traditional bank loans, Fundera has worked hard to build a solid reputation of trust, professionalism, and competitive rates. With a wide range of loan types and flexible repayment options, Fundera gears itself towards small business loans and provides loans of anywhere from as little as $5,000 up to $5 million.

Read the full Fundera review >>

Fundera Fundera View Rates

3. OnDeck


  • 24-hour approval
  • Excellent customer service

OnDeck offers conventional business loans and lines of credit, allowing flexibility to get the loan you need. Best of all, you can have your money within 24 hours with fast approval and excellent customer service.

Read the full OnDeck review >>

OnDeck OnDeck View Rates

Know Your Recurring Costs and Overhead

You also need to calculate the monthly cost of doing business for at least the first 6 months, possibly up to a year. Without this calculation, you may have trouble covering your expenses until you start generating a consistent stream of revenue, which can take time to build up. Anything requiring a monthly payment, including rent, utility bills, payroll, and loan payments, counts as a regular cost of doing business. To ensure you can meet these payments, take the time to create detailed cash flow projections based on current market conditions. 

What Startup Cost Estimates Do For You

The sum of your startup and recurring costs tells you approximately how much money you need to get your business off the ground. Once you have this estimate, start planning how you’re going to finance the start of your business. You may discover you need a business loan to stay afloat during the initial phases of startup, and this additional cost should be factored into your projections. Using financial planning software or working with a financial advisor can help you keep everything straight. Expect to take a loss at the start, but keep a careful eye on cash flow to ensure the overall trend progresses in an upward direction as your business starts to grow.

If you’re struggling to get approved for a loan, check out our breakdown of some of the best small business loan lenders.