How Much Does It Cost to Start a Business in 2026?

How much does it cost to start a business? Most founders can answer that question for the obvious stuff: rent, equipment, inventory. It's the rest of the list that catches them off guard.

Payroll taxes they didn't budget for. Overtime that crept up before they noticed. A lease deposit that was due before they'd made a single sale. A first-year failure that had nothing to do with the product and everything to do with running out of cash before revenue stabilized.

The difference between businesses that make it and ones that don't is rarely the idea. It's whether the founder knew the real number before they opened the doors. This guide breaks down exactly how much money to start a business by type, walks through the expenses most founders miss, and gives you a framework to calculate your total capital requirement before day one.

Small business startup costs range from $3,000 to $500,000+ depending on your business type, location, and whether you hire employees from day one. What is the average cost to start a business? Across all types, the median lands around 10,000–30,000 for service and online businesses, with brick-and-mortar businesses averaging significantly more.

Startup cost ranges by business type:

Biggest cost categories to budget for:

The average startup cost for a business ranges from $3,000 to $500,000, with online businesses typically under $10,000 and brick-and-mortar locations often exceeding $100,000. Americans filed 5.62 million new business applications in 2025 alone, per U.S. Census Bureau data, and the cost of entry varies just as widely as the businesses themselves. What you'll pay depends on your business model, your location, and whether you're bringing on hourly employees from day one.

Location drives major cost differences. Urban commercial rent can run two to four times higher than suburban or rural alternatives. Team size matters just as much, since doubling your headcount roughly doubles your payroll from the start.

The lowest startup costs of any business type. You'll pay for a domain, website hosting, basic tools, and initial marketing, but you skip rent, fixtures, and POS hardware entirely.

A realistic monthly tool budget for a solo online business: an e-commerce or booking tool (0–79/month), email marketing (15–50/month), and accounting tools (20–50/month), for a total of 50–200/month in recurring overhead before you've made a single sale.

In r/smallbusiness discussions on startup costs, owners of lean online businesses consistently report sub-$5,000 launches. One digital marketing agency founder described spending roughly $2,000 on a website, tools, and marketing materials, and noted how few physical requirements a business needs to get off the ground when the product is a service or digital offering.

Cleaning companies, landscaping, dog walking, home repair. Key costs here are a vehicle or equipment, general liability insurance (minimum 350–500/year), licensing, and initial marketing. The equipment costs are modest. The labor costs are not.

Service businesses with hourly employees face labor as their dominant expense from day one, often 50–70% of revenue. That's where time tracking and scheduling discipline matters before the business scales, not after.

Real-world service business launches back this range up consistently. In r/smallbusiness, one owner described launching a pop-up food and beverage concept for $5,000, covering business setup, insurance, market rent, equipment, and initial inventory, and scaling it to seven figures in seasonal revenue within a few years. Another started a landscaping business with $200 and a new mower, later expanding into cleaning with barely any capital upfront. 

The through-line: service businesses can launch lean precisely because labor, not equipment, is the real cost.

Beyond inventory, you're paying for storefront rent, displays and fixtures, a point-of-sale system, and signage. The lease deposit alone often surprises first-time retailers: urban commercial tenants typically pay two to three months' rent upfront before opening. A $3,000/month space costs 6,000–9,000 before the first sale.

The 50,000–150,000 range holds up in practice. In r/smallbusiness, one retail store owner reported spending roughly $120,000 to open. Another opened a specialty bag and EDC store using a $25,000 HELOC, covering buildout, inventory, and the first months of rent, and described the business as self-sustaining within three months. Both are well within the range, and both cite lease costs and inventory as the largest line items.

The most expensive business type to launch. Commercial kitchen equipment alone runs 40,000–80,000. Add renovations (20,000–100,000+), health permits, and staffing costs for your first few months, and the numbers climb fast.

A new restaurant typically targets 30–35% labor cost, though most run closer to 35–40% in year one before operations stabilize. On $40,000/month in revenue, that's 14,000–16,000/month in wages alone, before payroll taxes add another 7.65%. Plan for it from the start.

For a full breakdown of restaurant-specific costs, see how much does it cost to open a restaurant and our guide to restaurant budgeting.

Before you open your doors, you need capital for one-time business start-up costs. These set up costs for a business are different from your ongoing monthly overhead, and most founders underestimate both. These are the expenses that get your business operational but won't recur monthly. Here's what most businesses pay in one time startup costs.

How to calculate your one-time startup costs:

Example: A cleaning business needs $8,000 in equipment + $500 in licensing + $400 in insurance + $2,000 in marketing = $10,900. With a 20% buffer: $13,080 minimum.

Your biggest one-time expense for most businesses. A home office setup runs 2,000–5,000. Retail stores need 10,000–30,000 for displays, shelving, and a POS system. Restaurants spend 40,000–80,000 on commercial kitchen equipment and refrigeration.

Worth considering: leasing rather than buying. Many first-year businesses lease POS systems, refrigeration units, or vehicles to reduce upfront capital requirements and preserve cash for operations.

Filing articles of incorporation or forming an LLC costs 100–250 with your state. A registered agent runs 50–150/year. If you bring in a lawyer for contract templates and legal structure review, budget two to four hours at 150–500/hour.

General business licenses run 50–200 depending on your city and state. Industry-specific permits vary widely, and what's required in one state may not apply in another. Check early, since processing can take weeks. The SBA business license guide is the best place to start.

Service businesses skip this entirely. Retail and food businesses should budget conservatively here: most new owners overstock in year one and tie up cash in inventory that sits.

DIY platforms cost 12–40/month but take time to build. Professional design runs 2,000–10,000. Most small businesses spend 500–1,500 for a functional site with clear contact info and booking or ordering capability. In 2026, that's table stakes.

First-year premiums include general liability (350–500), a business owner's policy (515–685), and workers' compensation if you hire (typically 450–1,000/year per employee; varies significantly by industry and state). Construction and food service require additional coverage. Don't skip workers' comp, as it's required in most states once you bring on your first employee.

Total one-time startup costs range from $8,000 to $200,000+ depending on your industry. The average start up cost for an online business lands near the low end; brick-and-mortar businesses sit at the high end. Online and home-based businesses stay at the low end. Brick-and-mortar locations with employees land at the high end.

After your initial investment, you'll face recurring expenses every month. These costs exist whether business is slow or booming, and you should budget for at least six to twelve months of them before expecting consistent revenue. Here's what makes up the average monthly expenses for a small business and the ongoing cost of running a business once you're open.

Home-based businesses pay near zero. Coworking spaces cost 200–500. Small retail or restaurant spaces run 2,000–8,000+ in most markets. Utilities add 430–750/month for a typical small location: electricity (180–300), internet and phone (60–100), water and gas (190–350). Restaurants with extended hours pay more. These are the fixed costs of running a business that don't pause between slow weeks.

Payroll is your largest monthly expense, and most new owners underestimate it. According to the Homebase August 2026 Main Street Health Report, drawn from timesheet data across 150,000+ small businesses, average hourly wages were $16.59 overall, $14.15 in food and drink, and $15.89 in retail, up 6.2% year-over-year.

A team of three to five hourly employees at 14–16/hour costs 9,684–17,320/month in base wages (based on 40 hours/week, 4.33 weeks/month). After employer FICA taxes of 7.65%, add 741–1,325/month. Total payroll cost for a small team: 10,425–18,645/month, before any overtime. These figures are a useful starting point for estimating the monthly costs of running a business before you open.

For a deeper look at managing these costs from day one, see our guide to small business payroll.

Insurance averages 145–215/month when you spread annual premiums across the year. Monthly tool subscriptions run 50–200/month: scheduling and time tracking, payroll, accounting, email marketing. Payment processing costs 2.5–3% per card transaction, an expense that adds up fast.

Here's the math most owners miss: a business doing $20,000/month in card transactions pays 500–600/month in processing fees. Over twelve months, that's 6,000–7,200. It's rarely in the initial budget.

The rule of thumb: save six to twelve months of operating costs for a business before opening. For a business with $10,000/month in overhead, that's 60,000–120,000 in working capital on top of your one-time startup costs. Roughly 22% of businesses close within their first year, and cash flow problems are consistently the leading cause, not bad products, not weak markets. Runway.

Monthly operating costs × 6 = minimum runway Monthly operating costs × 12 = recommended for restaurants, retail, and any seasonal business

The importance of personal runway, not just business runway, shows up consistently in r/smallbusiness. One IT consultant described starting with roughly three months of living expenses saved and said it was barely enough, emphasizing that low-overhead service businesses can become profitable quickly, but only if the owner survives long enough to find clients. The runway requirement isn't just about keeping the business open. It's about keeping yourself solvent while the business ramps.

For businesses with hourly employees, whether that's a restaurant, a retail store, or a cleaning crew, labor becomes your largest cost at 25–35% of revenue. Most new owners budget only base wages. The real number is higher.

A $16/hour employee doesn't actually cost $16/hour. Here's what you're actually paying, based on Homebase's August 2026 Main Street Health Report, which puts the overall small business average at $16.59/hour, $14.15 in food and drink, and $15.89 in retail:

For a full-time employee at 2,080 hours/year, that's $33,280 in wages, but 37,000–41,000 in total cost once taxes, workers' comp, and any benefits are added. Multiply by your team size to understand your actual annual labor bill.

For a detailed breakdown of how to run this math for your own business, see how to calculate labor cost.

Beyond wages and taxes, factor in these expenses that most startup budgets miss entirely:

For industry benchmarks on what labor should cost as a percentage of revenue, see Bureau of Labor Statistics employer cost data.

Luanne Ronquillo, owner of Ruru Baked in Toronto, was logging 60-plus hours a week when she was managing scheduling manually, often covering shifts herself when no one else could. After getting better tools in place, she cut her own hours to 40 and gained the time to dig into labor cost data by role. What she found: her front-of-house was overstaffed. She trimmed hours strategically, kept her team's pay intact, and is on track to improve labor cost efficiency by 5%.

"The great thing about Homebase is you have all the different roles. So I was seeing: how much is back of house making? And then how much are we staffing front of house? I love using it for all our locations and seeing the numbers so I can actually see how much labor we're using a day." — Luanne Ronquillo, owner of Ruru Baked

Labor as a percentage of revenue varies significantly by business type:

If you're tracking above benchmark, the fix is usually scheduling, not headcount. Look at where shifts overlap, where overtime is creeping in, and whether your coverage matches your actual busy hours.

Tracking labor costs against sales from day one prevents the creep that turns a profitable concept into an unprofitable operation. Seeing your labor percentage update in real time as you build schedules, so you catch overruns before payroll runs and not after, is exactly what Homebase scheduling is built for.

Even careful planners miss the hidden costs that derail startup budgets. Budget an extra 10–20% of your estimated costs as a contingency fund, then add these to your list.

Payroll taxes (7.65% of all wages). Many founders tally up their business start up costs and budget $30,000 for wages, but forget the $2,295 in mandatory employer FICA taxes. Not optional.

State unemployment insurance (SUTA). Beyond FICA, most states require new employers to pay state unemployment tax. New employers often pay the highest rate: 3.4% in California for new employers on the first $7,000 of each employee's wages. This catches first-time employers off guard every year.

Self-employment taxes (15.3% for sole proprietors). Sole proprietors and single-member LLCs pay both the employee and employer portion of Social Security and Medicare. The rate applies to 92.35% of net profit, so your effective rate is roughly 14.1%. Budget accordingly if you're not incorporating.

Compliance penalties. Missed breaks, incorrect overtime calculations, and late payroll tax deposits each carry penalties. In California, a single missed meal break costs $1/hour of wages per occurrence. For a 10-person restaurant, one week of violations equals 350–700 in exposure.

Credit card processing on tips. Restaurants and service businesses pay processing fees (typically 2.5–3% per transaction) on tip amounts too. On $5,000/month in tips, that's 125–150/month in fees most owners never budgeted for.

License and permit renewals (100–1,000 annually). Initial licenses are one-time costs, but most require annual renewal. Health permits, professional licenses, and business registrations recur every year.

Payment processing fees (2.5–3% per transaction). A business with $100,000 in annual card revenue pays 2,500–3,000 in processing fees. That's money that doesn't appear in most startup projections.

Bookkeeping and accounting (200–500/month). Even with accounting tools at 20–50/month, most businesses need monthly bookkeeping help and quarterly CPA consultations for tax compliance.

Bank fees (15–50/month). Business checking accounts charge monthly maintenance fees and transaction fees. Shop around before you open your account.

Contingency buffer (10–20% of total budget). Equipment breaks. Suppliers fall through. Markets shift. A $50,000 startup budget should include a 5,000–10,000 emergency fund. This isn't optional padding. It's what keeps a rough month from becoming a closure.

Knowing how much it costs to start a business is one thing. Calculating startup costs for small business is another. Most founders only do half the math. Here's a four-step framework that accounts for everything.

List every cost you'll pay before your first dollar of revenue: equipment, deposits, permits, inventory, website, professional fees, first month's rent (often due before opening), insurance premiums, and marketing for launch. Be specific. "Misc." is where budgets go wrong.

Project rent, utilities, payroll, insurance, tools, and supplies for the first month of operation. This is your baseline burn rate. It's the number you'll need to cover every single month, regardless of revenue.

Multiply your monthly operating costs by six (minimum) or twelve (recommended for restaurants, retail, or seasonal businesses). This is the working capital you need on top of your startup costs, not instead of them.

One-time startup costs + (monthly operating costs × runway months) = minimum capital needed to launch safely.

Example:

Psst…manual time cards and missed punches don't show up in your startup budget, and by then the damage is done. Getting time tracking right from hire one prevents those errors and costs nothing to set up with Homebase.

Most founders who close in year one didn't run out of ideas. They ran out of runway. Building in six to twelve months of operating costs before opening is what separates businesses that survive the ramp-up from ones that don't.

For more on managing cash flow once you're open, see cash flow for small business. If you need financing to bridge the gap, small business loans covers your options.

Hiring your first employee changes the cost structure of your business entirely. You're not just adding a wage. You're adding payroll taxes, workers' compensation, onboarding time, and the infrastructure to track and pay them accurately.

The first-year true cost of one hourly employee at 16/hour,workingfull-time:wages(33,280) + employer FICA ($2,546) + workers' comp (typically 450–1,000/year, varying by industry) + onboarding time = approximately 37,000–39,000 before any benefits. Budget for it before you post the job listing.

What breaks when you don't have systems in place from day one: buddy punching adds phantom labor costs, missed overtime tracking creates payroll errors and potential wage violations, and manual time cards turn payroll day into a guessing game. For a full breakdown, see new employee cost.

Labor runs 25–35% of revenue for most restaurants and hourly businesses, often the biggest surprise when founders first ask how much does starting a business cost. Poor scheduling, untracked overtime, and manual time cards don't just create stress. They turn thin margins into losses before you've had a chance to find your footing.

Bradley Cooke, Executive Director of Forebay Aquatic Center in Oroville, California, ran payroll manually with a paper-based process for years. In peak summer season, his payroll jumped from a few thousand dollars per month to $17,000 every two weeks, and a broken system made every cycle stressful.

"It was a pain. There were a lot of issues, and they were expensive. And tax time was a nightmare. I was counting on them to just make this easy for me, and it was never easy." — Bradley Cooke, Executive Director, Forebay Aquatic Center

After switching to Homebase, Brad cut payroll management costs by 30% and now runs payroll in 30 minutes, roughly ten times faster than before.

Payroll errors and missed punches are a cost that doesn't show up in your startup budget but will show up in your margins. Getting time tracking, scheduling, and payroll working together from day one is what 150,000+ small businesses trust Homebase for.

Starting a business with no money is possible, service businesses built on existing skills, like consulting, cleaning, or tutoring, have the lowest barriers. Work from home to skip rent, use free tools for marketing, and reinvest early revenue rather than drawing a salary.

Most no-money startups trade capital for time, and for many, that's the right call. How to start a business with no money →

How much money do you need to start a business? At minimum, enough to cover all one-time startup costs plus 6–12 months of operating expenses before you open. For a business with $10,000 in startup costs and $5,000 in monthly overhead, that's 40,000–70,000.

Restaurants and retail stores need the higher end of that range. Cash flow problems are the leading cause of first-year closures, don't launch on the minimum.

For brick-and-mortar businesses, equipment is typically the largest one-time startup cost at 30–40% of total capital. Once you're operating, payroll becomes the biggest ongoing expense at 25–35% of revenue.

Underestimating labor costs, including payroll taxes, overtime, and turnover, is the most common budgeting mistake in year one.

Monthly operating costs for a small business with 3–5 employees typically range from 5,000–18,000, with payroll as the largest line item. This is often the core of what people are asking when they want to know how much does it cost to start a small business. Fixed costs like rent, insurance, and tools run 1,500–7,000/month.

Variable costs, particularly labor and inventory, shift with sales volume. Budget for at least six months of operating costs before opening.

Calculating startup costs for a business comes down to four steps: list every pre-opening expense, estimate monthly operating costs, multiply those costs by your target runway (6–12 months), then add the two totals together.

That final number is your minimum capital requirement. Use the SBA's startup cost calculator as a starting point, then adjust for your business type and location.