Starting a small business is scary and intimidating if you don’t know the cost to start a company. You don’t even know where to start, so you don’t even start. I know that feeling.

When I opened my business, I paid several thousand dollars to a lawyer to help me start it correctly. After being in business for many years and helping others start their own companies, I learned that there are just a handful of things to know about starting a company and its cost.

Cost to Start a Company

Whether you are trying to collect cash to start a company or figuring out how big of a loan you may need, these 13 things are crucial to know what you are getting yourself into when opening a business.

Keep in mind, some of these payments are monthly. You will need to make sure to have enough for six months as a start up to ensure you have money to pay for your all your bills. Yes, we all want thousands of sales on the first day of opening, but we all know, that is not always the way it happens. Getting prepared financially is what we need to do.

One more thing to understand. Some industries require a lot more start up costs than others. Food industry can get costly if you are opening a restaurant, but much cheaper if you are working from a licensed kitchen at home.

Here are the 11 things to know about the cost to start a company.

1. Do you need any equipment?

Equipment can get costly and it can take anywhere from $5,000 to $125,00 to buy everything you need to start the company. Make a list of all the things you need to start the company. Make sure they are a must have piece of equipment not a want or would be nice type of expense. Start small to keep cost low.

Every industry is different and will require special equipment to start the business. What are you needs? A restaurant will need ovens, worktables and refrigerators. A salon will need chairs, washing bowls and supplies to cut hair. A contractor will need to drills, hammers and a work truck. You get the point. List everything you will need from small equipment to big items.

2. Register your business name.

Depending on your state and the option you choose, registering your business can cost $50 to $300. It may be even more if you are choosing several options.

You will need to make sure you are operating legally in your state. First, create a name and make sure that it available. Search on google if there is another business out there with this name and if you do not see one, you are ready to register your business.

There are different levels of registering your business and you can learn more about those options on the SBA Government website. Personally, I just registered my business at the state level and that was good enough for me.

3. Make your business legal.

This is where you will decide how to make your business legal in your state and receive a specific number to identify your company called an EIN (Employer Identification Number) for your company. Here are some common ways people like to register their business as: LLC, corporation, partnership, or nonprofit corporation. An article from the SBA Government website explains it very well here. Read carefully to understand what would be right for your business. This cost can run up to $300 depending on your industry.

4. Will you need to rent a space?

You will need to consider rent or a lease if you need a space for your business. This can cost anywhere from $1000 to $3000 for a smaller space. As a small retail food business, I was paying under $3000 a month for my space. I was also located outside of the city so, the cost was affordable. What type of space will you need?

If you need an office space, can you save money by using a bedroom in your house to keep costs low? Consider what options you have to save money on the cost to start a company.

5. How much inventory will you need to start your company?

It depends on your industry, but most industries will need to buy product to make product. Will you need ingredients, hair color, printer paper, cleaning supplies?

This can be hard to figure out especially in the beginning when opening your company, but make the best decision you can. Be ready with enough product so that you can start and not so much that it can spoil (food company).

When I opened my bakery, I bought way too much product! My portions for food were way off and I ended up throwing away a lot of product. Lesson learned! Get just enough and if need be, run to the store to get more. Not having enough is a better problem than throwing away food.

So, what should inventory cost you? It depends heavily on your industry, but the recommended percentage is 15-25% of your total budget.

6. Are you going to invest money into marketing?

If you want to get your name out there faster than the organic growth route, you must invest into marketing. The recommended amount to spend for marketing is 10% of your budget.

Beware, not all marketing is effective. Choose wisely where you will spend your precious dollars on marketing.

Do some research. Will you pay for social media ads? Will you do mailers? How about a billboard? Any newspaper articles? How about magazines? Any google ads? How about showing up on the local news channel?  These are all great ways to start getting your name out there and some of these options may be free in your area. Our local newspaper happily wrote an article about our business for free and our local news channel invited us for the cooking segment.

7. Are you going to make a website?

Send your customers to a website where they can learn about your business. This will cost money though. You will need to purchase the domain and then pay a monthly fee to have the website up and running. Website can cost anywhere from $5-$40 a month. Purchasing a domain and hosting platform can range from $30-50 as one-time fee. Consider these costs as you plan to open your business.

8. Will you have employees?

Do you need employees to start your company? If you don’t, that is good news. You are the only one who will get paid without the extra expenses and this will save you so much money to start your business.

If you need employees, consider these costs:

What is the hourly rate or salary you will pay your team members?

Will you have paid time off?

Will you offer bonuses?

You will need to save 12-15% on taxes that you will need to pay as an employer on top of the wages you will be giving your team.

How much is the software you will use to process your payroll?

Having team members can be costly. Really consider whether you need team members in the beginning or can the job be done by you and your family for a while until your business takes off. Maybe you can hire part-time help. Whatever it is, keep payroll costs under 35%!!!

9. What are the utility costs?

You will need to pay for the lights in the building, propane, gas, water, trash, lawn care, snow removal. What will that cost you? Ask local businesses in your area that are similar. What are they paying? This will give you a better understanding of what to budget for monthly. Utilities should cost between 3-5% of your budget.

10. Will you hire a bookkeeper or CPA?

I don’t understand all the legal terms, so hiring a Certified Personal Accountant and a lawyer was important to me. Every year my CPA would close Quickbooks for our company and offer any advice throughout the year to minimize any taxes. Our first year in business we paid our CPA $800 to close the year off.

11. Business Insurance

You will need to protect yourself and your business for any emergencies that may come up. There are two coverages to consider.

General Liability will cover your business as a whole. Consult with an agent to see what is best for your business industry. This cost can run anywhere between $400-800 per year.

Worker Compensation insurance is if you have any employees. This will cover any injuries your team members will encounter on the job. This would all depend on the size of your company, but to start with a very slim team of ten, the cost can be between $300-600 per year.

12. Contract Work

No one warned me about this one. If you own a retail space, you must hire out to help do plumbing, electricity, build any walls, paint, and install gas lines or the hood. All of this can add up pretty quickly and be very expensive. This is a cost everyone should consider. This can run between $500-$8000, depending on the work that needs to be completed.

13. Do you need any licenses or certificates?

Some industries require permits, licenses or even certificates to operate. For instance, in the food industry I had to get two licenses and a ServSafe certificate. This cost me $325. Does your industry require any special licensing or certificates? Write this out.

Are you ready to start your company? List out your costs to open your company and start preparing.