Building a new company is not cheap, but it may not be as expensive as you think. The pandemic has had a severe impact on the economy, which has resulted in a larger pool of qualified workers looking for jobs, lower advertising rates, cheaper real estate, and less competition.
Average Startup Costs for Businesses
It’s not easy to develop an average for starting a business since it can vary widely. However, for the most common businesses—retail and services—the average comes to about $30,000. The amount will increase or decrease depending on the scope of the business and industry. Here are some industry figures to consider.
Note on cost: We’re going to assume that everyone has at least one good-quality computer and internet access. If you do not, add $2,000 to any cost below.
Cost to Start a Retail Business
Retail costs cover a wide range because location and inventory vary so widely. In all cases, you need a storefront, advertising, a Point-of-Sale system, a payment processor, employees, and display equipment.
Here are a few examples of starting costs:
Costs vary and include whether or not your beauty supply would have a salon or spa as part of this business or just a basic supply store. A print shop could be basic printing needs or all the way to 3D printing.
Online Retailers: $50 to $9,000
Online retail is less expensive because you don’t pay overhead. However, you need a website with a shopping cart, a place to store supplies (unless you are running a dropshipping enterprise), and packing and shipping materials. This can run anywhere from a few hundred to a few thousand dollars, depending on how much you handle from your home and the cost of your inventory.
If you choose to design clothing, some services such as Teespring let you sell for a percentage of the price. Once a sale on their website occurs, Teespring will make the shirt, ship it, and handle refunds for a percent of the sales price. In that type of business, your only upfront cost is the software for design.
If you do choose to sell online and need an online store, we recommend Square Online. It’s an ecommerce platform that enables you to sell online and features include inventory management, shipping tools, and integrations with Square POS and social media apps. It has a free plan and paid monthly fees that start at $12.
Dropship Business: Over $100
Dropship businesses make the right choice for someone wanting to go into retail with minimal up-front investment. You just need a good computer, internet access, marketing, and a payment processor. You can add your own ecommerce store, or stick to established sites like Amazon that provide dropshipping services.
Restaurant: $10,000 to $2 Million
How much you invest in your restaurant depends heavily on the type of restaurant. High-end dining requires a premier location, finer seats, more qualified chefs, and more expensive foodstuffs, including wines and special ingredients.
Meanwhile, a local family diner might make a hit with framed T-shirts of the high-school sports teams, inexpensive tables and chairs, and the standard burger-and-fries fare. Here are general cost ranges for a restaurant, $3,000 per seat, or $100 to $800 per square foot of building space.
Learn more about How to Start a Restaurant in our in-depth guide.
Food Truck: $30,000 to $200,000
Food trucks are growing in popularity and are cheaper and less manpower-intensive than a restaurant. Initial investments include the truck, the supplies, insurance, workforce, uniforms, paper products, marketing, a payment processing service, and licensing. You’ll also need permits and inspections.
Learn more about How to Start a Food Truck in our in-depth guide.
Construction Business: $15,000 to over $200,000
Construction Contracting is not a cheap business, but generally, contractors ask for some payment up-front to purchase supplies and job permits. Therefore, your startup costs come from licensing, insurance, professional-grade equipment and transportation, and of course, marketing.
Consider starting small with only a few employees, and you might get by with an investment as low as $15,000. Learn more about contractor loans and financing to invest in this kind of business.
Custodial or Cleaning Service: Over $1,000
Cleaning services are generally inexpensive to start. All you need are cleaning supplies, marketing, your license, and insurance. Costs increase as you add employees and if you need additional vehicles.
If you are working with businesses instead of homes, your equipment costs will go up, as you may need commercial cleaning equipment such as floor buffers or carpet cleaners. Insurance will be higher as well.
Learn more about how to start a cleaning business in our in-depth guide.
Home Repair and Maintenance Service: $2,000 to $20,000
Home repair and maintenance services cover several jobs, some of which don’t require a lot of training. Here are a few starting cost examples:
Costs include equipment, licensing, and transportation. Some companies can operate out of the home, while others, like fencing, may require a large property for storing supplies.
Lawn Care or Gardening Service: Over $3,000
Remember the days when the kids mowed the lawn? Now, more often, people are hiring lawn care services to handle that and the basic upkeep of plants.
The most significant expense here is with equipment, which includes everything from the lawnmower and trimmer to truck signage and business cards—not to mention a truck or trailer to carry it all in. If you can’t afford to buy a truck outright, consider a used trailer or lease a truck instead. Don’t forget marketing and insurance in your calculations.
To learn more about How to Start a Lawn Care Business read our in-depth guide.
Consulting and Services Company: $500 to $50,000
Businesses often hire out for expertise, especially when they don’t need a full-time employee for a job. Business consulting and services fulfill a wide variety of B2B (business to business) needs:
- Accounting
- Advertising
- Business Plan Writing
- Content Marketing
- Customer service consulting
- Human Resources
- Headhunting
- Legal Consulting
- Market Research
- Public Relations
- Social Media Marketing
- Virtual Assistant
Some of these jobs take very little initial investment. Virtual assistants, for example, need only internet access, a phone, a good computer, a desk, and a chair. They most likely will use their client’s software for everything else. Recruiters and headhunters are also low-overhead businesses.
If you add employees, then you need to consider insurance, location, equipment, and benefits. No matter the size of your business, you won’t get very far without advertising and a website.
Software or Web Development Company: $12,000
Under software development, we include app development. As one would expect, computers and software comprise the most significant expense after office space. Cloud-based storage and software-as-a-service (SaaS) can cut some of the initial costs.
Marketing your software or services is another large investment. But insurance and licensing are less, as you don’t have the same liabilities as a construction company, for example.
Healthcare Service: $50,000 to $350,000
If caring for the sick and elderly is your calling, then a healthcare service may be the business for you. Companies offering medical services have higher starting and operating costs because of malpractice insurance, which can run up to $70,000 per year per physician, depending on your state. You also pay for specialized equipment and highly trained personnel.
There are non-medical healthcare services as well, where you help with in-home care, transportation, or other types of non-medical assistance. Here are a few of those businesses with approximate startup costs:
Finance Service: $5,000 to $50,000
Finance services cover the investment of money and can include cryptocurrency, investment firms, and insurance. You may need a license such as a CFP (Certified Financial Planner) for financial consulting, plus advertising and office equipment.
In most cases, a standard computer will not be powerful enough to handle the calculations needed for high-speed finance, especially for cryptocurrency and bitcoin mining.
Bitcoin mining businesses, for example, use application-specific integrated circuits (ASICs). These can run as high as $12,000, although you can purchase an ASIC miner for $500 to $3,000 and join a mining pool.
Insurance Agency: $5,000 to $50,000
To sell insurance, you need a license. You should also invest in insurance management software that allows you to work quotes, track policies, and manage accounting tasks. It can run $5,000 to $25,000.
If you decide to be an independent agent, then company representatives will charge $125 to $250 per visit to consult. Therefore, with office space, you should plan to spend $15,000 to $40,000.
Real Estate Brokerage: $20,000 to $200,000
The real estate brokerage industry is worth over $164 billion, with brokers earning an average of $160,000 a year after expenses. Startup costs can run as low as $20,000 for a basic independent company, while franchises run up to $200,000.
Costs to consider include your license as an agent and a broker, office space, marketing, insurance, staff, and administrative needs including software and a website.
To learn more about starting a brokerage read our in-depth guide.
Real Estate Business: $3,000 to $50,000 (Plus Property Purchase)
Love HGTV? A real estate business involves the buying, selling, flipping, renting, and maintenance of land or buildings. It’s a large investment that can have a great payoff in the end. In addition to purchasing the property and making the renovations or repairs, you need to keep in mind insurance, registering as an LLC, and more. We do offer an in-depth course on real estate investing for beginners for those who want to learn more.
Freelance Career: $500 to $3,000
Freelancing is growing in popularity—it allows people to take advantage of telecommuting, and follow their interests and expertise. It also allows companies to access a more varied workforce. Freelance businesses can range from graphic arts design to IT consulting to administrative or even C-level advising.
Freelancing costs include the computer equipment and programs you need, plus any fees for marketing. Additionally, there may be a cost for signing up on freelance sites or those with referral programs. Some of the top places to find freelance work are Upwork and Fiverr.
Common Startup Costs
While each business will have its unique funding issues, there are certain costs every business needs to consider: legal registrations, a location, equipment, employees, software, utilities, and marketing.
Other common startup costs that many people fail to consider are the costs incurred by your family as you are building up your business. These include household expenses that would have been covered by your previous day job, health insurance, child care, and transportation. It can also cover costs like having a business plan written or purchasing a new suit for talking to investors.
Skip the Startup: Franchises and Buy-Outs
You don’t always have to start a business from scratch. Franchises are a great way to start ahead, with the training programs, marketing, uniforms, and other details already worked out and provided more cheaply than if you did it on your own. While you incur franchise costs ranging from $10,000 to over $100,000, it cuts your up-front work and expenses.
Alternately, many business owners who don’t want to close will put their businesses up for sale to someone who will take over. This gets you started with everything from the building to the employees, plus an established reputation, so after the lump sum of the purchase, you are merely taking on the operating costs.
You can explore franchises further by visiting a franchise directory and portal website. Several of the sites listed also include businesses for sale. If you’re interested in a home-based business, we offer a guide to the best home-based franchises.
Where to Get Funds to Start a Business?
Unless you’ve been saving or have come into a large inheritance, you may not have all the money you need to start your business. Fortunately, there are a great many ways to get initial capital for your startup, as well as funding to grow.
- Rollover for Business Startups (ROBS): If you have retirement funds of over $50,000, you can reinvest them into a business instead.
- SBA loans: These are government-sponsored lower-interest loans. Talk to your bank.
- Angel Investors: Investors or investment companies provide funding in return for partial ownership or stock in your company.
- Crowdfunding: Many businesses have had success with crowdfunding sites like Kickstarter or CircleUp. Crowdfunding often depends on a reward system such as products or special deals for sponsors.
- Federal grants: Find applicable grants for your business at the grants.gov website.
- Local Government/Economic Development Commissions: Many local, county, and state governments have programs to entice businesses to open in their area. They provide grants for such things as land purchases and buildings, as well as incentives.
- Personal or Home Equity Loans: While not the best option, as it puts your personal assets at risk, it’s still worth considering.
Bottom Line
It’s crucial to consider startup costs when determining what business is right for your financial situation and ultimately choosing which business to start. The numbers above can give you an idea of general ranges, but they will vary by location and what you need versus what you already have.
Rick Feltenberger
Averages; we gotta love’em, right! I always find you information insightful and even an experienced hand like myself learns something new. I disagree with your article (not your data, but with the impression it could leave wannabe entrepreneurs).
I guess it depends on how we define “start a business.” I assist hundreds of folks every year in the task of starting a business in rural America. Last year the average capital investment was $294,000. These aren’t gold plated startups, simply main street businesses like florists, coffee shops, retail boutiques, and restaurants in Counties with populations of about 2,000 people. These are sustainable businesses (profitable + cash flow positive) that provide a reasonable current income and potential for wealth creation.
There are always folks coming to my office wanting to start a for-profit business that: is 100% grant funded or 100% bank funded or they have no money; yet they “read on the internet” that they can start a business for $300.
Again, I don’t dispute your data as I’m positive that the ‘average’ of all the data you have is $30,000. All I’m saying is that unless someone uses the 30k to leverage a 300k loan (assuming excellent credit, 5 C’s, etc) they are not going to be positioned to hire employees, purchase equipment, or have a marketing plan that actually reaches their ideal customer.
Just my 2-cents Blake. Keep up the good work.
Amanda Norman
Hi Rick,
Glad you enjoyed the article, and thanks for sharing your insight.
Best wishes,
Mandy, Moderator