How Much Money Do You Need to Start a Business?

There isn’t one number that tells you how much money you need to start a business. Your startup costs depend on the type of business you’re starting, what you need before opening and how much it will cost to operate while you build sales.

A service-based business might start with a few hundred or a few thousand dollars, while a business that requires equipment, inventory, employees or a physical location may need significantly more.

Instead of starting with a target number, start by calculating what it will cost to open your business and keep it operating while you build sales.

At ASSETS, we work with entrepreneurs at different stages of starting, growing and financing their businesses. A realistic startup budget can help you understand what you need, what you already have and whether there’s a funding gap.

Not sure whether your numbers are realistic? ASSETS can help you think through your startup costs, funding needs and next steps. Schedule a free Discovery Call.

Start With Your One-Time Costs 

First, list what you’ll need to get your business ready to operate. That might include: 

As you build your list, ask: Do I need this to start, or do I want this eventually? You may not need the most expensive equipment, a custom website or a fully built-out space on day one. Separating what’s necessary from what’s nice to have can reduce how much money you need upfront.

Understand What It Costs to Make a Sale 

What does it cost to sell your product or deliver your service? Consider materials, ingredients, packaging, transaction fees, shipping and labor. Understanding these costs can help you build a more accurate budget and set prices that support your business. 

Your first version of the business doesn’t have to be the final version. If your full concept requires $40,000, could you test a smaller version for $10,000? Could you sell at markets before signing a lease? Could you start with one piece of equipment instead of three? Starting smaller can help you learn what customers want before committing more money. The goal isn’t to spend as little as possible. It’s to spend intentionally. 

Calculate Your Startup Number 

Once you’ve researched your expenses, put the numbers together: 

One-time startup costs 
+ Operating expenses before you expect sales to cover them 
+ A financial cushion for unexpected costs 
= Estimated startup funding needed 

For example, suppose you need $2,300 in one-time startup expenses, expect to spend $1,200 per month to operate and want another $1,500 available for unexpected costs. 

If you plan to cover three months of operating expenses, your estimate would be: 

$2,300 + $3,600 + $1,500 = $7,400 

Your number will change as your assumptions change. What’s important is that it’s based on your business rather than a guess. 

How Will You Fund the Business? 

Once you know your estimated startup number, compare it with the money you already have available for the business. The difference between what you need and what you have is your funding gap. Entrepreneurs may cover that gap through personal savings, business revenue, loans, grants or a combination of funding sources. 

If you’re weighing your options, read Business Loans vs. Grants: What’s the Difference?

Need Help Thinking Through Financing? 

If you’ve calculated your startup costs and identified a funding gap, ASSETS may be able to help. 

ASSETS offers small business lending for entrepreneurs across Central Pennsylvania. Funding can support eligible business expenses such as equipment, tools, supplies, certifications, insurance and other business needs. 

A free Discovery Call gives you an opportunity to talk through your business, what you’re trying to fund and how much you need. From there, we can help you determine what next step may be appropriate.