Business Startup Costs That Business Owners Need to Know

The key to launching a successful business is preparation.

Preparations include things like knowing your business start-up costs to ensure you can pay the bills. 

But calculating your business start-up costs can do more than just keep the lights on. It can also help estimate profits, secure loans, attract investors, and conduct a break-even analysis. 

Understanding your start-up costs also helps you keep enough funds set aside for ongoing expenses, so you don’t have to depend on an immediate cash flow.   

So, if you’re almost ready to launch your venture, let’s ensure your success by reviewing your business start-up costs:

1. Market Research Costs

Starting any business without analyzing your future market is a risky business.

There are 3 different levels of market research, but all prove the feasibility of investing in your target market:

1. Top-level reports

A top-level report provides a broad overview of an industry, including its size, market leaders, and their strengths and weaknesses.

Use: It’s ideal for anyone who wants to gain an in-depth overview of a marketspace before diving in and investing. 

Cost: The cost depends on market size but typically runs from 60 to 80 pages long and costs between $100 and $1,000. 

2. Full-market reports

A full-market report scrutinizes an industry and contains a high level of detail. 

The report breaks down a market into several subcategories, such as region, end-use, technology, industry trends, competitors, and market projections. 

Use: It’s suitable for industry experts who need an up-to-date overview of how a market is performing, which way it’s trending, and where their business stands compared to competitors.  

However, start-ups and entrepreneurs also use full-market reports to support their efforts in securing funding and investment. 

Cost: Full-market reports are a hefty 100 to 500 page document ranging from $1,000 to $5,000. 

3. Product detail market reports

A product detail report covers market performance and trends, relevant influential subcategories, and other values specific to a particular product and the region you intend to sell them. 

Use: It’s suitable for industry experts who need to know every detail about a specific market and any influencing factors that could derail their plans. Perfect for gaining a clear picture of how a new product will perform before investing in stock and marketing. 

Cost: Product reports are often 500 pages or more, and prices range from $10,000 and up, depending on market size. 

2. Incorporation Expenses

Unless your business is a sole proprietorship, you must register your new business with your state. 

Incorporation expenses include registering a business structure, paying for permits, hiring an attorney (optional), employing a registered agent (also optional), and filing paperwork.  

Incorporation filing fees

Incorporation filing fees are costs you must pay before you begin doing business, so you need to be sure you can afford them.

Filing fees are state and county-specific and vary depending on the business, but all types of LLCs and corporations must pay them.

Cost: For example, the cost to  incorporate a business in Mississippi is $50, while in Connecticut it costs $455. 

Documentation and filing services

You can find out the average fees for your new business by visiting the Internal Revenue Service or your state’s tax board website.

Get the forms you need to register your business from your secretary of state’s website. 

Attorney and agent fees

Businesses with a complicated structure such as a corporation or a multi-member LLC often hire an attorney to register an article of organization and draft their operating agreement.

An operating agreement is an essential legal document that outlines critical factors such as the owner’s shares, duties, and wage structures. 

Cost: A recent Contracts Counsel’s survey showed the cost of hiring an attorney to register a business and file an articles-of-organization is between $660 to $700. 

Registered agent's fees

All LLCs require a registered agent to receive official paperwork on their behalf. You could save some money and act as your agent if your business has a registered postal address, is open during business hours, and you’re over 18.

Cost: Registered agent fees range from $100 to $300 per year depending on the state. 

DBA fee

A sole proprietor can choose to register as a DBA (Doing Business As) to trade under a name other than their own.  

Cost: DBA registration requirements vary by city, county, and state, but filing fees usually range from $10 to $100. You register a DBA at your county clerk’s office or with your state government. 

Permits and licenses

Most businesses need to get a federal or state license and permits before they can start doing business. 

The documents you need and their costs depend on your business type, industry, location, and processing fees. But on average, a business license is between $40 to $200, plus your annual renewal charge.

You can research licenses and permit requirements on the U.S. Small Business Administration website. 

3. Business Insurance Costs

Business insurance comes in several forms that’s both a start-up and ongoing cost you must account for. 

You’ll need it to protect you and your assets from any legal liability in case of litigation. Also, to cover your customers and employees should they become injured on your property, during work duties, or when using your product or service. 

On average, U.S. businesses pay up to 30% of their gross income on comprehensive insurance coverage, including life and health insurance. 

Let’s look at what insurance policies suit your needs:

General liability insurance

A general liability insurance policy covers you and your business against any claims, including property damage and bodily injuries resulting from your operations, services, or products. 

Cost: General liability in the U.S. ranges from $500 to $800 per year depending on the industry and business. 

Professional liability insurance

Professional liability insurance (PLI), also called professional indemnity insurance, protects a business against negligence and personal injury claims.

Professionals such as lawyers, doctors, and accountants need PLI, as general insurance doesn’t protect them against claims of misrepresentation, malpractice, or negligence. 

Cost: The U.S. average for professional liability insurance ranges between $600 to $1100 per year per employee. 

Workers’ compensation insurance

Workers’ compensation is mandatory in all 50 states; it covers your employee’s income in cases of work-related illness or injuries. 

For example, suppose your employee can’t work because of an injury. In that case, it pays a percentage of their paycheck and covers their medical expenses. 

As every industry and paycheck differs, insurance companies use factors like payroll and work type to determine the costs of workers’ compensation insurance. 

Cost: An annual medium-premium can cost around $560 and can rise significantly if working in a high-risk industry like construction or fishing.  

Business owner's policy insurance

A business owner’s insurance policy combines liability and property coverage in one neat bundle.

Because of its transparency and easy-to-understand layout, it’s a popular choice for small to medium business owners, such as contractors, retail stores, wholesalers, and restaurants. 

Cost: The average cost of a business owner’s insurance policy is $1,200 per year.

Data breach insurance

Data breach insurance protects your business against hacking and data robbery, and costs vary depending on the size of your business and location. 

Costs: A U.S. industry average for data breach insurance is $1,500 per year. 

4. IT Infrastructure Costs

IT infrastructure is the term used to describe the components used for IT solutions and services. You can deploy it in 2 ways: Either within your business’s facilities or hosted within a cloud computing system. 

Infrastructure costs include software, hardware, operating system (OS), networking components, and data storage. 

Small to medium businesses can purchase a software-as-a-service (SaaS) and run it in-house or outsource to a managed IT service provider to reduce payroll costs. 


Hardware can include personal computers, servers, routers, data centers, and other equipment. 

Hardware costs can vary dramatically based on your company’s operating needs. For example, a system that runs on Apple is usually more expensive than its Windows counterpart. 

You could pay as little as $500 for a basic Windows set-up, while a top-of-the-range Apple hardware system could be as much as $3,500. 


Software covers a range of applications that most small businesses need to run effectively, such as your content management system (COM), web servers, and operating system.

It’s hard to put a price on software as it varies from company to company. 

So, before you invest, identify which tools your business needs, as each industry has its own requirements. 

Some software tools small business owners often use are:


Networking comprises interconnected components that enable communication and management between your company’s external and internal systems. 

In other words, it keeps everything and everyone connected.

Networking includes things like your internet connectivity, firewalls and security systems, and hardware such as routers, cables, and switches. 

It isn’t easy to put a price on your networking requirements as it depends on your company structure. For example, a single-member LLC might only require a laptop, firewall protection, internet connection and pay $50 per month. In comparison, a C corporation’s networking costs could run into the thousands.

Ecommerce website set-up cost

Your budget plays the primary role in your e-commerce website set-up costs because there are many unique elements to an e-commerce site, each affecting the price.

For example, the average set-up cost of an e-commerce store selling 100 to 1,000 products starts at $5,000 and can rise to $50,000 depending on design and functionality. 

When you know what you can afford to spend, you’ll be able to decide which platform is right for your business.  

But without a set budget, you could easily overspend. 

5. Workspace Costs

In 2021, the average cost of a traditional U.S. office lease was between $9 and $24 per square foot, per month, depending on location.   

But as you know, office needs have transformed over the past 3 years as more people look for affordable and flexible solutions, such as remote and hybrid model workspaces.   

Assigned, shared, and co-working spaces

Assigned, shared, and co-working spaces refer to a workspace shared by people from different industries and companies. 

Workers can either share assigned areas within a building or use an ad hoc strategy called hot desking. Hot desking is where employees from different businesses alternate desk ownership on specific days and times. It’s a popular approach as a recent DeskMag survey found the average U.S. hot desk costs $195 per month, while a dedicated desk is $387 per month. 

Hybrid working models

Many of us have used a hybrid working model, which is working in the office one week and remotely the next.

This model suits modern-day needs as it provides the flexibility to work at your most productive hours and reduce your office and travel expenses. 

6. Marketing and Sales Expenses

Marketing and sales expenses are the external and internal costs related to marketing your product or service and converting leads into sales. 

They aren’t only business start-up costs; they continue every day you promote your company. 

That’s why you need a marketing plan that enables you to estimate your ROI (return on investment) and justify every marketing dollar you spend. 

Some of your marketing and sales expenses could include maintaining and promoting your business website, an email marketing campaign, social media management, employing influencers, and traditional marketing techniques like print, TV, or radio. 

Let’s look at digital first:

Digital branding and advertising

Digital branding and advertising is a brand management strategy that helps you develop your brand across several digital platforms. 

Its purpose is to create brand presence and consumer awareness. Enabling your company to foster internet relationships with your target audience, leading to increased engagement rates and sales. 

Cost: The U.S. Small Business Administration recommends you allocate 7% of your annual gross revenue towards your digital branding budget. It’s reported that in the U.S., small to medium businesses spend between $500 to $6,000 per month on digital branding. 

Offline marketing

Offline marketing includes local and national media, transit advertising (trains, buses, and subways), billboards, brochures, business cards, and flyers. This method plays a crucial role for many businesses, especially local brick-and-mortar stores. 

Statistics back this up:

Cost: Offline advertising costs vary from where you advertise and the mediums you use, but the U.S. average is $22 per every 1,000 people reached utilizing the strategy. 

7. Human Resources

Many small business owners don’t include human resources (HR) in start-up costs, believing it only applies to larger organizations.

While the truth is, every business needs a functioning and up-to-date HR department. The better your HR, the lower your employee turnover rates, and as it can cost thousands of dollars to hire new employees, they’re worth keeping.  

HR includes recruitment and hiring costs, employee screening, staff training and recognition, employee benefit programs, and increasing productivity. 

Recruitment and hiring costs

Finding and attracting the best employees to your business comes at a price. Here are some you may not have thought about.

The hidden costs that come with recruitment:

A recent society of human resource management survey found that the average cost of hiring new employees is $4,000 per person! 

Training, productivity, and development (HR tools)

Training, productivity, and development refer to any educational, advancement activities, or software tools you use to enhance your employee’s skills and knowledge.

The instruction and information they provide enable your staff to perform at a higher level, increasing productivity and all-round workplace satisfaction.  

Cost: In 2020, companies spent on average $1,111 per employee on training, productivity, and development. 

Employee recognition programs and incentives

Employee recognition programs are an excellent way for businesses to keep their top employees and reduce their recruitment costs. 

A recent survey by Gallop showed that disengaged and unappreciated employees have an 18% lower production and 16% lower profitability rate than their happier counterparts. 

Cost: A World at Work survey found that the average annual budget for employee incentives and recognition programs to be as low as 2% of gross income. So, it’s well worth investing in your employees, as the happier your workforce, the higher your turnover. 

How to calculate your business start-up costs

You can calculate your business start-up costs using the U.S. Small Business Administration website. 

There are 3 template categories available: 

Don't forget about first-year deductions

In your first year of business, you can deduct up to $5,000 of organizational costs and $5,000 of your business start-up costs. 

There are specific terms and conditions, but every dollar you save is one less you’ve got to earn. 

Now that you’re starting a new business, you might have to re-apply for business licenses and permits.

As regulations for permits and business licenses vary by locality, industry, and state, contact your local state’s office or use the Small Business Association Licenses and Permits Tool to determine whether your new LLC has to re-apply. 

To Wrap It Up

Business start-up costs haven’t changed too much over the years. But as we’re all too aware, no one can predict unforeseen market influences and disruptions.

Give your business the best chance for success by planning ahead and preparing for the future. By knowing your business start-up costs, you can do precisely that.

This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.

Terry is a serial entrepreneur with over 25 years of experience building businesses across multiple industries – construction, real estate, e-commerce, hotelier, and now digital media. When not working, Terry likes to kick back and relax with family, explore Taoism’s mysteries, or savor the taste of fine Italian red wine.