The Average Cost to Start Up a Business

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There are no average costs of starting a business because, truly, there are no average businesses. Each has its own opportunities and challenges, which is what makes for competition. The first thing an entrepreneur learns is to conserve cash. There are basic costs—such as legally forming a partnership of corporation, obtaining a business license, resale license and any other industry licenses you may need. Beyond those expenses, and the money you will need to live for at least a year, the cost of starting your company depends on what you intend to do and where you intend to do it.

Home-Based Business

Professional startup consultants advise remaining in your home office and garage for as long as you can while you are developing your business for launch. If you can contain your startup costs by running your business from home, it will extend the amount of time you will have to grow your company until it produces enough profit to easily support an outside office or storefront. The cost of starting a business at home includes a computer, printer, phone, other office machines, marketing collateral like business cards and brochures, and any production tools and equipment your may need. You should be able to start your business for under $5,000, including legal and licensing costs.

Local Enterprise

Once you move out of your home office and garage, you take on an extra set of expenses, such as rent, store or office furnishings, phone and utilities, insurance, and possibly even an additional employee or two. This raises your monthly expenses by $1,000 to $10,000 and may not improve your revenues, so conserve your cash as long as possible. Small space in an executive office suite ranges from $300 to more than $1,000 per month. Retail storefronts are more expensive, with prices ranging from a few hundred dollars to in excess of $1 million depending on size, furnishings and location.

Public Potential

If your business model can scale up to a size that is appropriate for listing as a public company trading on an exchange, your startup costs and funding options change. Most seed-round investors will supply $50,000 to $250,000 for the development phase through launch. If you can produce revenues quickly, your next round of funding will be in the area of $1 million to $5 million, depending on the amount of revenues and your earnings outlook. Technology companies tend to cost $250,000 to $1 million to launch because of the equipment and programming involved. Considerable expense comes in with marketing activities, which should return at least 400 percent of your marketing costs, or you are spending too much.

Franchises

Many people find buying a franchise to be an easy way to start a business. Costs range from $1,000 to $5,000 for a direct-marketing home-based franchise. Fast-food restaurants run from $250,000 to more than $1 million. These franchise fees may not cover all expenses, though, and may only be the start of expensive monthly charges.

References

About the Author

Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.

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