The Cost of Starting a Small Business
When would-be entrepreneurs begin daydreaming about starting up their first business, one of the most prominent mental hurdles is the question: “How do I find enough money?” Because the costs of starting up a small business are pretty nebulous and range widely, people can sometimes let their imaginations get the best of them, dreaming up bigger and bigger numbers they’ll have to meet to get their dream up off the ground.
But for a good chunk of small businesses, that number may actually be much smaller than you expect, depending on what industry you’re starting in.
Today, we’ll examine a new study detailing startup costs … and talk to you about how to tackle some of those initial expenses.
Small Business Startup Costs Won’t Crush Your Dreams
A 2019 Kabbage survey of 600 thriving U.S. small business owners found some encouraging news for would-be entrepreneurs: The majority of current owners were worried about money just like you, and their costs were manageable if not surprisingly low.
The survey (PDF here) found that across the board, 58 percent of small businesses started out with less than $25,000. And if even that number sounds worrisome, worry not – roughly a third kicked off operations with less than $5,000.
That wasn’t the case for all businesses, of course.
Among business owners who said it cost more than $100,000 to begin, the heaviest concentrations came from restaurants (38 percent), medical offices (23 percent) and the manufacturing industry (19 percent). The cheapest businesses – those that most frequently were started with less than $5,000 – came from accounting (45 percent of owners surveyed), online retail (44 percent) and construction and landscaping (39 percent).
Also prominent among small business owners was a lack of confidence in being able to remain financially solvent for long. From the survey:
“Of the respondents surveyed, 65 percent of entrepreneurs admit they were not fully confident they had enough money to start their business. In fact, the overwhelming majority of entrepreneurs (93 percent) calculated a run rate of shorter than 18 months.”
In short: Financial worries are par for the course – even among eventually successful business owners. Don’t sweat it. But be ready for the costs you might have to incur.
Money Matters
What costs will you likely face in the earliest stages of getting your small business up and running? Here’s a quick look:
- Rent: Some small businesses start out of someone’s basement or garage, but often, a dedicated work facility is a better option or a necessary – it’s difficult to make construction equipment or serve barbecue to hundreds of people out of your living room.
- Equipment: Equipment costs are going to vary a great deal based on your type of business, too. A small accounting startup, for instance, can get by early on with a few computers, printing supplies and minimal office space. But a restaurant is going to need commercial-grade kitchen appliances, utensils, tables and cleaning supplies. A manufacturer is going to need tools and machinery to produce its wares.
- Payroll: This certainly will vary, as many small business owners often go it alone in the early days. But if you need additional personnel, workers won’t be free. However, you can at least lessen the brain-pain of having to deal with personnel by relying on these payroll apps.
- Legal costs: Most types of businesses must secure certain permits and licenses at the federal, state and sometimes even city level. You’ll also need to decide what kind of business structure you’ll take on, and adopting that structure likely will involve a few more fees at the start.
- Website: It’s 2019. Small businesses of every stripe should have a website, even if your website isn’t going to be the primary driver of your business. The good news? Bare-bones costs are pretty low, with services such as Wix and Weebly sitting around $25 per month.
How do you get started? We have some advice for a range of startup troubles, but if you’re specifically concerned about finding funding, we have a few tips.
But the best advice we can give you is to not take your first steps alone. McManamon & Co. is a full-service business accounting, tax, fraud, forensic and consulting firm that can offer you support. We offer everything from basic business consulting services to M&A analysis– for when you’re getting so large you can swallow other companies, or if you want to cash in after all your hard work.
For now, let’s focus on that first step. Call us at 440.892.9088 or contact us online to find out everything we can do to help turn your small business dream into a reality.
Tags: cost of starting a small business, McManamon, small business | Posted in accounting, McManamon & Co., small business