How Much Does It Cost to Start a Business in 2025?

With 16 million new business applications filed since 2021, more Americans are launching businesses than ever before. But many founders tend to underestimate their startup costs, leading to cash flow problems that cause business failure.

The difference between survival and closure? Realistic financial planning before opening day. Whether you're budgeting for a café, online store, or service business, understanding true costs—including hidden expenses like payroll taxes and scheduling inefficiencies—determines whether you thrive or join the roughly 20% that close within their first year.

TL;DR: How much does it cost to start a business?

Quick answer: Starting a business costs $3,000 to $500,000 depending on your type, location, and team size.

Cost ranges by business type:

• Online/home-based: $3,000-$10,000
• Service business: $5,000-$25,000
• Retail store: $50,000-$150,000
• Restaurant/café: $100,000-$500,000+

One-time startup costs include:

• Equipment: $2,000-$100,000
• Incorporation fees: $150-$450
• Licenses and permits: $50-$500
• Initial inventory: $2,000-$20,000 (if product-based)
• Website: $500-$5,000
• Marketing/branding: $500-$3,000

Monthly operating costs include:

• Rent: $500-$5,000+
• Utilities: $430-$750
• Payroll: $3,000-$20,000+ (your biggest expense)
• Insurance: $145-$215
• Software: $20-$150

For businesses with hourly employees: Labor is your largest cost at 25-35% of revenue. A $15/hour employee actually costs $18-$21/hour after payroll taxes, workers comp, and benefits.

How much does it cost to start a business? Average costs by type

Starting a business costs between $3,000 and $500,000, with online businesses typically under $10,000 and brick-and-mortar locations often exceeding $100,000. The cost to start a business depends on your business model, location, and whether you hire employees.

Online businesses: $3,000-$10,000

The lowest startup costs. You'll pay for website hosting, domain registration, initial inventory (if selling products), and basic marketing. Most online business owners work from home, avoiding rent entirely.

Service businesses: $5,000-$25,000

Cleaning companies, consulting firms, or personal training need minimal equipment. Budget for business insurance, licenses, a vehicle for mobile services, and marketing to attract clients.

Retail stores: $50,000-$150,000

Beyond inventory, you're paying for storefront rent, displays and fixtures, point-of-sale systems, signage, and several months of operating expenses before sales stabilize.

Restaurants and cafés: $100,000-$500,000+

The most expensive to launch. Commercial kitchen equipment alone runs $40,000-$80,000. Add renovations, permits, initial food inventory, furniture, and staffing costs for your first few months.

Why such a wide range? Location drives major cost differences. Urban locations pay 2-4 times more for commercial rent than rural areas. Your team size matters too—hiring 10 hourly employees instead of 5 doubles your payroll expenses from day one.

The biggest ongoing cost? Labor. Businesses with hourly employees spend 25-35% of revenue on payroll once operational. A restaurant generating $50,000 monthly needs to budget $15,000-$17,500 for team wages, taxes, and benefits.

Understanding how much it costs to start a business in your industry helps you budget realistically and avoid the cash flow problems that close 20% of new businesses in year one. Next, we'll break down the specific one-time and monthly expenses that make up these totals.

One-time startup costs: What you'll pay upfront

Before you open your doors, you need capital for one-time startup costs. These initial expenses get your business operational but won't recur monthly. Here's what most businesses pay upfront when calculating how much it costs to start a business.

Equipment: $2,000-$100,000

Your biggest one-time expense for most businesses. A home office needs $2,000-$5,000 for a computer, printer, desk, and chair. Retail stores require $10,000-$30,000 for displays, shelving, and POS systems. Restaurants spend $40,000-$80,000 on commercial kitchen equipment, refrigeration, and furniture.

Incorporation fees: $150-$450

Filing articles of incorporation or forming an LLC costs $100-$250 with your state. Government filing fees add $50-$200. Budget $500-$1,500 if you hire a lawyer to handle formation.

Licenses and permits: $50-$500

General business licenses run $50-$200 depending on your city and state. Industry-specific permits vary—food service health permits cost $100-$1,000, while professional licenses can reach $500-$2,000. Check requirements early since processing takes weeks.

Initial inventory: $2,000-$20,000

Product-based businesses need starting stock. Small boutiques start with $5,000-$10,000 in inventory. Larger retail operations invest $15,000-$50,000 to properly stock shelves. Service businesses skip this cost entirely.

Website: $500-$5,000

DIY platforms cost $12-$40 monthly but require your time. Professional design runs $2,000-$10,000. Most small businesses spend $500-$1,500 for a functional site with basic e-commerce capabilities.

Marketing and branding: $500-$3,000

Logo design costs $300-$2,000. Initial marketing materials—business cards, signage, launch promotions—add $500-$2,000. Start lean and scale marketing spend as revenue grows.

Furniture and supplies: $1,500-$2,000 per employee

Each employee needs a desk ($300-$800), chair ($200-$600), computer ($500-$1,500), and supplies ($100-$200). Home-based businesses save here. Brick-and-mortar locations budget for reception furniture and break rooms too.

Insurance: $500-$2,500

First-year premiums include general liability ($350-$500), business owner's policy ($515-$685), and workers compensation ($155-$540 per employee). Industries like healthcare or construction require additional coverage.

Legal and accounting: $500-$3,000

Business lawyer consultation ($150-$500/hour for 2-4 hours) establishes contracts and legal structure. Accountant setup ($150-$300/hour for 2-3 hours) creates bookkeeping systems and explains tax obligations.

Total one-time startup costs range from $8,000 to $200,000+ depending on your industry. Home-based and online businesses stay on the lower end. Brick-and-mortar locations with employees hit the higher range.

Monthly operating costs to budget for

After your initial investment, you'll face recurring monthly expenses. Budget for at least 6-12 months of operating costs before expecting consistent revenue. These ongoing expenses exist whether business is slow or booming.

Rent: $500-$5,000+ per month

Varies dramatically by location and size. Home-based businesses save entirely. Shared coworking spaces cost $200-$500. Small retail or restaurant spaces run $2,000-$8,000+ in most markets.

Utilities: $430-$750 per month

Electricity ($180-$300), gas ($90-$150), water ($100-$200), internet and phone ($60-$100). Restaurants and retail with extended hours pay more.

Payroll: $3,000-$20,000+ per month

Your largest ongoing expense. A small team of 3-5 hourly employees at $15/hour costs $9,000-$15,000 monthly including taxes. More on labor costs in the next section.

Insurance: $145-$215 per month

Averaged from annual premiums. Actual costs depend on industry, number of employees, and coverage levels.

Software subscriptions: $20-$150 per month

Accounting software ($20-$50), scheduling and time tracking ($0-$40), email marketing ($15-$50), project management ($10-$30). Costs grow with team size.

Marketing: $500-$2,000 per month

Digital ads, social media promotion, local advertising. Start with 5-10% of projected revenue and adjust based on what drives customers.

Supplies: $60-$125 per employee per month

Office supplies, cleaning products, small equipment. Fewer employees mean higher per-person costs since you can't buy in bulk.

Plan for 6-12 months of expenses. Monthly operating costs for a small business with 3-5 employees typically range from $5,000-$18,000. Multiply your monthly costs by 6-12 to determine working capital needs before launch.

For businesses with hourly teams, labor is your largest monthly expense. That's why accurate time tracking and efficient scheduling matter from day one—even small inefficiencies add up fast.

Labor costs: Your biggest ongoing expense

For businesses with hourly employees—restaurants, retail stores, service companies—labor becomes your largest cost at 25-35% of revenue. Most new business owners budget only base wages, but hourly employees cost 25-40% more than their stated wage.

True cost of hourly employees

A $15/hour employee doesn't actually cost $15/hour. Here's the real math:

• Base wage: $15.00/hour
• Payroll taxes: $1.15 (7.65% employer portion)
• Workers comp: $0.15-$0.75 (1-5% depending on industry and location)
• Benefits allocation: $0.75-$1.50
• Equipment and supplies: $0.50-$1.00

Total actual cost: $17.55-$19.40/hour

For a full-time employee working 2,080 hours yearly, that's $31,200 in wages but $36,504-$40,352 in total labor costs. Multiply by your team size to understand true annual expenses. A café with 8 employees at $15/hour pays $249,600 in wages—but $292,032-$322,816 in actual labor costs.

Hidden labor costs in your startup budget

Beyond base wages and taxes, factor in these often-overlooked expenses:

Time theft and scheduling inefficiencies

Employees clocking in early, taking long breaks, or buddy punching (clocking in for absent coworkers) adds unnecessary costs to your payroll. Proper time tracking prevents this.

Overtime premiums: 1.5x regular rate

Poor scheduling creates unnecessary overtime. A $15/hour employee costs $22.50/hour for overtime. Add payroll taxes and you're paying $24-$25/hour for those extra hours.

Onboarding and training: $1,500-$4,000 per employee

Initial training time, reduced productivity during the learning curve, uniforms, and administrative setup. High-turnover industries face this cost repeatedly.

Turnover replacement: 16-20% of annual salary

Recruiting, interviewing, background checks, and retraining when employees leave. For a $30,000/year employee, expect $4,800-$6,000 per replacement.

Labor costs by industry

Labor as a percentage of revenue varies significantly:

Restaurants: 30-35% of revenue

A café generating $50,000 monthly should budget $15,000-$17,500 for labor. Fast casual aims for 28-32%, while fine dining reaches 35-40%. Just 5% labor waste costs $750-$875 monthly.

Retail stores: 15-20% of revenue

A boutique with $40,000 monthly sales budgets $6,000-$8,000 for labor. Seasonal businesses see this percentage spike during slow months.

Service businesses: 50-70% of revenue

Cleaning companies, landscaping, or consulting have minimal overhead but high labor. A cleaning company with $30,000 monthly revenue spends $15,000-$21,000 on labor.

Smart labor management saves money. Accurate time tracking prevents payroll waste. Efficient scheduling reduces unnecessary overtime. Proper break management avoids compliance penalties. For a business with $10,000 monthly labor costs, these practices save $200-$800 monthly—$2,400-$9,600 annually.

Hidden costs entrepreneurs overlook

Even careful planners miss expenses that derail startup budgets. These hidden business costs catch new owners off guard and contribute to cash flow problems. Budget an extra 10-20% of your estimated costs as a contingency fund.

Payroll taxes: 7.65% of all wages

Many entrepreneurs budget $30,000 for salaries but forget the $2,295 in mandatory employer payroll taxes. This isn't optional—it's a federal requirement for every business with employees.

Self-employment taxes: 15.3% for sole proprietors

Sole proprietors and single-member LLCs pay both employee and employer portions of Social Security and Medicare taxes on business profits. Budget accordingly if you're not incorporating.

License and permit renewals: $100-$1,000 annually

Initial licenses are one-time startup costs, but most require annual renewal. Health permits, professional licenses, and business registrations recur every year.

Payment processing fees: 2.5-3% per transaction

Credit card processors charge per transaction. A business with $100,000 annual revenue pays $2,500-$3,000 in processing fees. American Express charges even more.

Bookkeeping and accounting: $200-$500 per month

Even with accounting software ($20-$50 monthly), most businesses need monthly bookkeeping help and quarterly CPA consultations for taxes and compliance.

Point-of-sale systems: $50-$200 per month

Beyond initial equipment costs, POS systems charge monthly subscription fees plus payment processing. Budget $100-$300 monthly all-in.

Training time: 20-40 hours per new employee

New hires aren't immediately productive. You're paying full wages while they learn—budget for 2-4 weeks of reduced output per employee.

Bank fees: $15-$50 per month

Business checking accounts charge monthly maintenance fees, transaction fees, and cash deposit fees. Shop around for small-business-friendly banks.

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 for unexpected costs when calculating how much it costs to start a business.

FAQs How much does it cost to start a business

Can you start a business with no money?

Yes, but you'll need creativity. Start with a service business leveraging your existing skills—consulting, freelancing, cleaning. Work from home to avoid rent. Use free marketing through social media and word-of-mouth. Explore grants from the SBA or low-interest microloans. Some founders launch with under $1,000 by starting very small and reinvesting early profits.

How much should I save before starting?

Save enough to cover all one-time startup costs plus 6-12 months of operating expenses. For example, a $50,000 startup should have $80,000-$100,000 saved ($50K startup + $30K-$50K for operations). This cushion prevents premature closure while building revenue.

What's the biggest startup cost?

For brick-and-mortar businesses, equipment typically consumes 30-40% of startup capital. Once operating, labor becomes the largest expense at 25-35% of revenue. Underestimating labor costs is the most common budgeting mistake.

Start your business with smart labor cost management

Labor costs represent 25-35% of revenue for most restaurants and hourly businesses, your single largest ongoing expense. Poor scheduling creates unnecessary overtime that eats into already thin margins.

Homebase helps you track employee hours accurately, build efficient schedules that prevent unnecessary overtime, run payroll seamlessly, and stay compliant with labor laws. Our customers save an average of 5+ hours per week on scheduling alone.

Whether you're starting a restaurant, retail store, or service business, get started with Homebase free today. Because when labor is your biggest expense, managing it efficiently isn't optional.

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