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How Much Does It Cost to Start a Small Business?
April 12, 2026
April 12, 2026
There’s not a single number that applies to every aspiring business owner. The cost can range anywhere from a few thousand dollars to millions, depending on factors like your business type, location, and more.
| Business Type | Estimated Startup Cost |
|---|---|
| Microbusiness / Solopreneur | $2,000–$10,000 |
| Service-Based Business | $5,000–$20,000 |
| Online Retail | $10,000–$40,000 |
| Brick-and-Mortar Retail | $50,000–$150,000 |
| Restaurant | $100,000–$500,000 |
| Manufacturing | $100,000–$1,000,000+ |
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 significantly higher upfront costs.
The overall cost of starting a business depends on a variety of expenses but it’s heavily influenced by key factors such as your location and the industry you’re entering.
The business model you choose significantly impacts your startup costs. Here's how online and physical businesses compare:
Total typical range: $2,000-$20,000
Total typical range: $25,000-$150,000
Different industries have unique cost structures and requirements. Here's a breakdown of average operating costs by industry from the US Census Bureau:
| Business Type | Total Estimated Annual Operating Expense (2022) |
|---|---|
| Motor vehicle and parts dealers | $215,697 |
| Grocery stores | $193,651 |
| Health and personal care stores | $91,143 |
| Clothing stores | $71,145 |
| Furniture stores | $32,271 |
| Shoe store | $15,193 |
| Beer, wine, and liquor stores | $14,339 |
To determine your startup costs:
According to the SBA, your startup cost calculation should include all one-time costs plus at least one year of monthly expenses. You can also check out the SBA's template for startup costs.
When planning your business expenses, it's helpful to categorize costs based on their function and how they relate to your business structure.
These are the day-to-day expenses required to keep your business running:
Expenses related to customer acquisition and brand growth:
Compliance and regulatory-related expenses:
Employee-related costs:
Understanding which expenses are absolutely necessary and which can be delayed can help you prioritize your startup budget and avoid cash flow problems.
Essential Costs:
Optional Costs (Scale Later):
Fixed costs remain relatively constant regardless of your business activity level. Some examples include:
Pro tip: Lock in the best deals 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 will help you survive small business debt if you need to borrow.
These expenses fluctuate based on your business activity. Examples include:
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.
While specific costs vary by industry, here's a general breakdown of what most small businesses can expect to spend in their first year:
Here's how a typical small service business with 2-3 employees might break down their first-year expenses:
| Expense Category | Amount |
|---|---|
| Rent/facilities | $12,000 |
| Employee 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 |
The first year of business can be challenging, as you’re fighting an uphill battle to establish yourself in the market. According to the US Bureau of Labor Statistics, about one in five businesses that opened in March 2023 closed down within one year.
However, you can improve your odds of success by estimating your costs as accurately as possible and building in a financial buffer to bridge any unexpected gaps.
If your projected startup costs exceed your available savings, exploring small business loan options may help cover the gap while preserving your working capital.
Create a professional business plan that outlines startup costs for all of these things, and then double it. The reason? Inevitably, there will be setbacks, delays, and mistakes that can become quite costly. It's important to have cash on hand to cover these occurrences.
– Rohit Arora, chief executive officer of Biz2Credit
Key Small Business Cost Statistics
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.
Most small businesses require between $2,000 and $50,000 to launch. Online and service-based businesses often start under $20,000, while retail, restaurants, and manufacturing operations may require $100,000 or more.
Yes, many service-based or online businesses can launch with $5,000 or less. However, brick-and-mortar businesses typically require significantly more capital due to rent, inventory, and equipment costs.
For physical businesses, rent and payroll are often the largest expenses. For online businesses, marketing and customer acquisition typically represent the highest ongoing cost.
Most small businesses should budget for at least 12 months of operating expenses before expecting consistent profitability. Cash flow challenges during the first year are a leading cause of business failure.
A small business loan can make sense if it helps preserve working capital and supports revenue growth. However, entrepreneurs should carefully calculate repayment ability and ensure projected revenue justifies borrowing costs.
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.
