Registration can cost under $300, but a storefront can run six figures. Here's how to budget for launch costs plus a year of runway
October 22, 2026
About 22% of new U.S. business establishments close within their first year, according to the U.S. Bureau of Labor Statistics. That means a little more than 1 in 5 don't make it to their first anniversary.
How much does it cost to start a small business? Startup costs range from a few hundred dollars for registration to six figures for storefronts, restaurants, and manufacturing. The SBA says registration costs less than $300 in most cases, though fees vary by state and business structure.
There's not a single number that applies to every aspiring business owner. The cost can range from a few thousand dollars to far more, depending on factors like your business type, location, and more.
If your estimate exceeds your savings, comparing small business loan options can help.
If you plan to use an SBA loan, know that the rules changed in 2026. Under SBA SOP 50 10 8.1, effective Oct. 1, 2026, 7(a) loans to startups require at least a 10% equity injection. Details are in the funding section below.
Costs depend mostly on whether you need a physical location, staff, and inventory. The table below shows illustrative planning ranges, not survey data, plus what typically drives each cost.
Illustrative startup budget ranges by business type
Business Type | Illustrative Planning Range | What Drives the Cost |
|---|---|---|
Microbusiness / Solopreneur | $2,000–$10,000 | Laptop, software, licenses |
Service-Based Business | $5,000–$20,000 | Equipment, insurance, marketing |
Online Retail | $10,000–$40,000 | Inventory, website, e-commerce platform |
Brick-and-Mortar Retail | $50,000–$150,000 | Lease, build-out, inventory |
Coffee Shop | Varies widely | Espresso equipment, build-out, permits |
Restaurant | $100,000–$500,000 | Kitchen equipment, permits, build-out |
Manufacturing | $100,000–$1,000,000+ | Machinery, facility, raw materials |
These are planning ranges, not survey data. Get local quotes before you set your budget.
If you're starting an online or service-based business, you may be able to launch with under $20,000. If you're opening a physical location, hiring staff, or managing inventory, expect higher upfront costs.
Your startup costs depend mostly on your location, storefront type, size, industry, and inventory needs.
Location: Urban and high-traffic areas increase costs for rent, utilities, and taxes compared to more affordable rural or suburban locations.
Storefront type: Online businesses avoid the lease, build-out, and fixture costs that brick-and-mortar stores carry.
Size: Larger initial operations demand more resources for inventory, facilities, and staffing, while starting small and scaling gradually reduces upfront costs and risk.
Industry: Manufacturing, hospitality, and healthcare businesses require specialized equipment, extensive inventory, and unique permits, while consulting or digital services need fewer upfront resources.
Inventory requirements: Your starting inventory (raw materials, works in progress, and finished goods) directly impacts costs—more inventory means higher startup expenses.
Usually, yes, because an online business skips the lease, build-out, and fixtures a physical store needs. FreshBooks estimates online businesses cost about $1,000 to $60,000+ to launch. The line items below are typical planning ranges to verify with vendors.
In these illustrative planning ranges, a typical online launch runs about $2,000 to $20,000. Processing rates were checked in October 2026 and can change.
Domain and hosting: $50-$300/year
E-commerce platform: $0-$300/month
Website design: $500-$5,000 (or DIY with templates)
Payment processing: About 2.6%–3.3% plus a fixed fee per sale, like Stripe's 2.9% + 30¢ or Square's 3.3% + 30¢ online (free plan)
Inventory management software: $0-$200/month
Digital marketing: $500-$3,000/month
Home office setup: $500-$2,000
Total typical range (illustrative): $2,000-$20,000
In these illustrative planning ranges, a typical brick-and-mortar launch runs about $25,000 to $150,000.
Lease deposit and first month's rent: $2,000-$10,000
Utilities deposits: $500-$2,000
Building renovations: $5,000-$50,000+
Fixtures and equipment: $10,000-$30,000
Signage: $500-$5,000
Point-of-sale system: $1,000-$5,000
Card processing: Card readers typically run 2.6% + 15¢ per in-person sale on Square's free plan
Initial inventory: $5,000-$25,000
Insurance premiums: $1,000-$5,000
Local marketing: $1,000-$5,000
Total typical range (illustrative): $25,000-$150,000
List your one-time costs, add monthly operating costs for your runway, then add a cushion. To determine your startup costs:
Research your business needs and create a comprehensive list of all expenses.
Split these expenses into one-time and ongoing costs (examples below).
Research each item's cost by comparing prices online, requesting quotes from multiple vendors, and negotiating—many suppliers offer discounts for new businesses or bulk purchases.
Compare your findings with industry benchmarks to ensure you're getting good deals.
The SBA recommends counting at least one year of monthly expenses, but says five years is ideal. That SBA page also links to its downloadable startup cost template.
Here's an illustrative example. Say your one-time costs are $15,000 and your monthly expenses are $3,000. With 12 months of runway, you'd need $15,000 + ($3,000 × 12) = $51,000 before any cushion.
If you budgeted only the $15,000, you'd be short by month two. Think of runway like a fuel tank: launch costs get you off the ground, and monthly costs decide how far you fly.
Plan for recurring fees and price swings that don't show up in a launch budget.
Annual state fees: Some states charge yearly fees. Delaware LLCs owe a $400 annual tax, per Delaware's LLC formation instructions.
Payment processing: Card fees come out of every sale, so they grow as your revenue grows.
Insurance renewals: Premiums come due again each year and can change at renewal.
Software subscriptions: Monthly charges add up as you add apps and users.
Equipment repairs: Machines and devices need maintenance and, eventually, replacement.
Tariff-affected costs: Tariffs may raise some inventory and equipment prices; see how tariffs are pushing small businesses to borrow.
Most startup budgets cover operational, marketing, legal, and staffing costs, plus formation fees tied to your business structure. When planning your business expenses, it's helpful to categorize costs based on their function and how they relate to your business structure.
Operational costs are the day-to-day expenses required to keep your business running:
Facilities: Rent/lease payments, utilities, maintenance, cleaning
Equipment: Machinery, computers, phones, furniture
Inventory: Product stock, raw materials, packaging
Technology: Software subscriptions, internet, cloud storage
Supplies: Office supplies, production materials
Marketing and sales costs are expenses related to customer acquisition and brand growth:
Website: Development, hosting, maintenance
Digital marketing: SEO, PPC advertising, social media management
Traditional marketing: Print materials, signage, direct mail
Brand development: Logo design, brand guidelines, visual identity
Customer acquisition: Sales tools, CRM software, lead generation
Legal and administrative costs cover compliance and regulatory-related expenses:
Business formation: Registration fees, licenses, permits
Professional services: Legal counsel, accounting, bookkeeping
Insurance: General liability, professional liability, property
Intellectual property: Trademarks, patents, copyrights
Compliance: Industry-specific regulations, data security
At private businesses with 1–49 workers, an employee costs $37.64 an hour in total compensation, per BLS data for June 2026. Employee-related costs include:
Compensation: Salaries, wages, commissions, bonuses
Benefits: Health insurance, retirement plans, paid time off
Taxes: Payroll taxes, unemployment insurance, workers' compensation
Training: Onboarding, professional development, certifications
Recruitment: Job postings, background checks, hiring services
Cost | Current Figure | Source |
|---|---|---|
Total compensation, private businesses with 1–49 workers (June 2026) | $37.64/hour ($27.88 wages + $9.76 benefits) | BLS Employer Costs for Employee Compensation |
Employer Social Security and Medicare (FICA) | 7.65% of wages (6.2% Social Security on wages up to $184,500, plus 1.45% Medicare) | |
Federal unemployment tax (FUTA) | 6.0% on the first $7,000 per employee; usually 0.6% net after the state credit |
In plain terms, benefits make up about a quarter of total pay costs at small firms.
State filing fees for an LLC range from about $40 to $500. According to the SBA, total registration usually costs less than $300, though fees vary by state and structure. Here's what filing costs in five states, per each state's official fee schedule:
Sole Proprietorship: Lower registration costs, self-employment taxes, and personal liability insurance.
LLC: State formation fees (see table), operating agreement, liability insurance.
Corporation: State filing fees, board governance, more complex tax filings.
One cost you can skip: U.S.-formed LLCs and corporations no longer file beneficial ownership reports with FinCEN, under a final rule from August 2026. For more detail, see what it costs to start a business by state.
Essential costs are what you need to open legally and serve your first customers, while optional costs can wait until you grow. Understanding which expenses are necessary and which can be delayed can help you prioritize your startup budget and avoid cash flow problems.
Essential Costs:
Business registration, licenses, and permits
Basic liability insurance
Core equipment needed to deliver your product/service
Essential software/technology
Minimal inventory to fulfill initial orders
Basic website or online presence
Tax ID numbers and basic accounting system
Initial marketing to reach first customers
Optional Costs (Scale Later):
Premium office/retail space (consider shared space initially)
Advanced equipment upgrades
Premium software packages
Large inventory stockpiles
Extensive branding and marketing campaigns
Additional staff (consider contractors initially)
Company vehicles
Extensive office furniture and decor
Premium business services
Fixed costs stay the same each month, while variable costs rise and fall with sales.
Fixed costs remain relatively constant regardless of your business activity level. Some examples include:
Rent/mortgage
Insurance premiums
Loan payments
Salaried employees
Subscriptions and memberships
Base utilities
Equipment leases
Pro tip: Lock in favorable rates when you first sign up, since you'll be paying these bills even when business is slow. Check your contracts once a year to see where you might save money. Managing these ongoing expenses also helps if you need to borrow; see the real cost of borrowing.
Variable costs fluctuate based on your business activity. Examples include:
Inventory
Shipping and packaging
Credit card processing fees
Hourly labor
Commissions
Utilities tied to production
Raw materials
Marketing spend
Pro tip: Adjust these expenses as your business needs change—increase them when you're busy and cut back during slow seasons or tough economic times.
Yes. You can elect to deduct up to $5,000 of startup costs and $5,000 of organizational costs in year one, per IRS Publication 583. Here's how the limits work under 26 U.S.C. Section 195:
Rule | What It Means for You |
|---|---|
First-year deduction | Up to $5,000 of startup costs plus up to $5,000 of organizational costs |
Phase-out | The $5,000 limit shrinks dollar for dollar once those costs exceed $50,000 |
Remaining costs | Amortized over 180 months (15 years) |
To amortize means to spread the deduction evenly over time. According to the U.S. Code's amendment notes for Section 195, the 2025 tax law changed only a cross-reference, not the dollar limits. A tax professional can confirm how these rules apply to you.
First-year spending is your launch costs plus 12 months of overhead. While specific costs vary by industry, here's an illustrative breakdown of what small businesses might spend in year one. These are planning ranges, not survey data.
A one-person business might spend about $15,000 to $40,000 in its first year, using these illustrative ranges:
Startup costs: $2,000-$10,000
Monthly overhead: $1,000-$3,000
First-year total: $15,000-$40,000
A business with two to five employees might spend about $70,000 to $200,000 in year one, using these illustrative ranges:
Startup costs: $10,000-$50,000
Monthly overhead: $5,000-$15,000
First-year total: $70,000-$200,000
Here's how a small service business with part-time help might break down its first-year expenses. This illustrative budget isn't survey data.
Illustrative first-year budget: service business with part-time help
Expense Category | Amount |
|---|---|
Rent/facilities | $12,000 |
Part-time staff compensation | $30,000 |
Equipment/technology | $8,000 |
Marketing/advertising | $6,000 |
Insurance | $4,000 |
Professional services | $5,000 |
Utilities/communications | $3,600 |
Supplies/materials | $3,000 |
Taxes/licenses | $4,400 |
Miscellaneous/contingency | $4,000 |
TOTAL | $80,000 |
One full-time employee at the BLS small-firm average would cost far more than this staffing row. See the hiring section above for current pay costs.
The first year of business can be challenging, as you're fighting an uphill battle to establish yourself in the market. According to the same BLS survival data cited above, about 22% of private-sector business establishments that opened in the year ending March 2024 had closed by March 2025.
However, you can improve your odds by estimating your costs as accurately as possible and building a financial buffer for unexpected gaps.
If your projected startup costs exceed your available savings, the funding options below may help cover the gap while preserving your working capital.
New business applications are high, but cash flow and financing remain common hurdles for young businesses.
Stat | What It Means for You | Source |
|---|---|---|
534,947 business applications in September 2026 (seasonally adjusted) | Plenty of people are launching businesses, so a clear budget can help you stand out. | |
59% of employer firms in business two years or less struggled to pay operating expenses; 53% reported uneven cash flow | Many young businesses run short on cash, so build runway into your budget. | |
67% of those young firms that faced financial challenges used the owner's personal funds to address them | Decide early how much of your own money you can put in. | Federal Reserve 2026 Report on Employer Firms (2025 survey) |
Many new owners combine personal savings with outside financing, such as loans or grants.
Personal savings can cover early costs without taking on debt, and many young businesses rely on them. According to the Fed's 2026 Report on Employer Firms, 67% of employer firms two years old or younger that faced financial challenges used the owner's personal funds to address them. Weigh the tradeoffs in our guide to using personal savings for business expenses.
Yes, but SBA loans to startups come with stricter rules in 2026. SBA microloans go up to $50,000, and the average is about $13,000. Standard SBA 7(a) loans go up to $5 million.
If you're considering a 7(a) or 504 loan, know these rules:
7(a) equity injection: Startups operating one year or less must put in at least 10% of project costs, under SOP 50 10 8.1.
504 contribution: New businesses using 504 loans must contribute at least 15%, under the same SOP 50 10 8.1.
Ownership: Since March 1, 2026, 100% of owners must be U.S. citizens or U.S. nationals living in the U.S.
For the full process, read our guide on how to get an SBA loan.
Beyond SBA loans, startup business loans include term loans, lines of credit, and equipment financing, and some owners also pursue grants.
Term loans: A lump sum you repay on a set schedule.
Lines of credit: Funds you draw as needed, up to a limit.
Equipment financing: A loan typically secured by the equipment you buy.
Grants: Funding you don't repay, usually with specific eligibility rules.
Full approval isn't a given. In the Fed survey, 68% of young employer firms applied for financing, but only 34% got the full amount they sought. Before you apply, review the types of business loans and compare government grants vs. business loans.
This guide is for anyone estimating what it'll cost to launch a business, especially first-time founders.
If you're a solo or online founder, start with the business-type table and the online cost breakdown.
If you're opening a storefront or restaurant, focus on the brick-and-mortar ranges and hidden costs.
If you're hiring from day one, review the employee cost table and payroll tax rates.
If you plan to borrow, read the funding section and the 2026 SBA rules.
It depends on your business type: registration alone often costs under $300, while storefronts can need six figures. The SBA says to budget at least a year of monthly expenses on top of one-time costs.
Often, yes. Many service-based or online businesses may be able to launch with $5,000 to $10,000, based on the illustrative ranges above. However, brick-and-mortar businesses typically require more capital due to rent, inventory, and equipment costs.
It varies, but for physical businesses, rent, build-out, and payroll can be among the largest costs. For online businesses, marketing and customer acquisition often are.
The SBA recommends budgeting at least one year of monthly expenses, and ideally five. Cash flow is a common struggle: 53% of young employer firms reported uneven cash flow, according to the Fed survey.
A small business loan can make sense if it helps preserve working capital and supports revenue growth. Calculate your repayment ability carefully, and note that SBA 7(a) loans to startups require at least a 10% equity injection.
This article relies on secondary sources, not a BestMoney survey. We used BLS Business Employment Dynamics and compensation cost data, Census Business Formation Statistics, and the Federal Reserve's 2026 Report on Employer Firms (2025 survey data).
We also drew on IRS Publications 583 and 15, IRS Topic No. 759, the U.S. Code, SBA program pages and SOP 50 10 8.1, and FinCEN. For fees, we used state secretary-of-state fee schedules and Stripe and Square pricing pages.
BestMoney's editorial team verified these figures in October 2026. Cost ranges by business type, line items, and sample budgets are illustrative planning ranges, not survey data.
U.S. Bureau of Labor Statistics: Survival of Private Sector Establishments by Opening Year
U.S. Bureau of Labor Statistics: Employer Costs for Employee Compensation by Establishment Size
Federal Reserve Banks: 2026 Report on Employer Firms (2025 survey data)
U.S. Small Business Administration: SOP 50 10 Lender and Development Company Loan Programs
U.S. Small Business Administration: Policy Notice on Citizenship and Residency Requirements
Arizona Corporation Commission: Schedule of Fees, LLCs (Rev. 3.2026)
Arizona Corporation Commission: Schedule of Fees, Corporations
Delaware Division of Corporations: LLC Formation Instructions
Massachusetts Secretary of the Commonwealth: Limited Liability Companies
Massachusetts Secretary of the Commonwealth: Corporations Filing Fees
FreshBooks: How Much Does It Cost to Start an Online Business
Your next step is to turn these estimates into a real budget and funding plan. Estimating small business startup costs can be challenging, but careful planning can improve your odds of success. By understanding the costs involved, securing funding, and managing expenses, you can position your business for long-term growth and profitability.
Build your cost list with the SBA's startup cost template, separating one-time and monthly costs.
Check your state's filing and annual fees before you choose a business structure.
Decide how many months of runway you can fund from your own savings.
If there's a gap, review how to apply for a small business loan.
Jessica Walrack is a personal finance expert at BestMoney.com, specializing in mortgages, loans, credit cards, and budgeting. Her work has been featured in U.S. News and Investopedia, where she delivers clear guidance on complex personal finance topics. Jessica’s goal is to empower readers to make confident decisions about their financial future.
