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What Is the Average Business Startup Costs in 2023?


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You have a great idea for a startup business and are ready to dive into production! But starting a new business involves more than just having a great idea. It means having the capital and financial planning in place to address overhead, initial product development and production, hiring staff, and more. The idea of that big a financial leap can be daunting, but you can build a business that meets your goals and achieve your dreams. So let’s look into business startup costs in 2023.


business startup costs


What Is the Average Cost to Start a Small Business in 2023?

The short answer is $30,000 to $40,000, but that also depends on whether your business requires multiple pieces of equipment, staff, and R&D. Here are just a few of the ways that those funds will be spent:

  • Business licenses & permits
  • Business insurance
  • Equipment & supplies
  • Inventory
  • Office space
  • Utilities
  • Employees
  • Marketing
  • Professional services (legal representation, bookkeeping)
  • Various software


Let’s dive into what each of these costs include and how to manage these small business costs effective.


10 Most Common Business Startup Costs You’ll Encounter

There are typical business startup costs that every owner has to address as part of getting their new company off the ground. Here are the 10 most common business startup costs and why they are a necessary part of your success.

Business licenses and permits

Before you can schedule your opening day, you need to register your business in your state, as well as apply for a license or permit in your city or country. Depending on the business and industry, you might need additional permits or inspections, such as if you were opening a restaurant.

Business Insurance

Investing in business insurance provides protection if you incur losses during the normal course of business. Coverage can be optimized to fit the needs of your business or industry, but most businesses opt for liability coverage and property damage. Sitting down with a local insurance agent who specializes in business insurance can assist you in determining the insurance needs of your small business.

Equipment and supplies

The truth is that while this is a common cost for most startups, not all businesses need the same equipment and supplies. If your business is a new restaurant, then you will be investing heavily in supplies and equipment. On the other hand, a bookstore or Amazon storefront might need less equipment but more funds put aside for inventory. Understanding your industry is key to determining how much you need to have budgeted for equipment and supplies.


If you are selling a specific product, then you will need to invest in inventory to get your business started, but as you grow your sales, your inventory needs will also change. Information or service-based businesses might not incur these same costs.

Office space/Commercial space

This small business cost varies greatly depending on whether you need to have a storefront, warehousing, or production space. Additionally, location and your specific commercial real estate market will also impact this cost.


Energy costs are continuing to rise, which can impact your small business costs. Be realistic about how much space you need, recognizing that you will have to pay for electricity, water, and heat for the whole space. Generally, smaller spaces use less and bigger spaces increase these costs.


Hiring staff to run your small business comes with multiple costs, including the following:

  • Payroll costs – taxes, payroll distribution, deductions, and bookkeeping for hours worked
  • Health insurance costs – dependent on the benefits you opt to offer
  • Employee benefit costs – vary based on the benefits offered
  • Recruiting costs – what it costs your startup to find, hire, and train a new employee


Additionally, there are various laws at the local, state, and federal levels that can impact your business depending on its industry, number of employees, and where you are conducting business. Investing in the right accounting software and bookkeeping service is an effective way to manage these costs and avoid costly accounting mistakes.




Opening your business isn’t enough to get sales. You need your target customers to know you exist and what you have to offer. Since digital marketing is on the rise, you need to determine the right mix of email marketing, social media, and content to reach your target audience and help them to connect with your business. Determining how much to spend will depend on who you are targeting, where they are found online, and your budget. Organic marketing strategies can be used but may take longer to see a boost in sales. Therefore, it is key to make sure your marketing strategy aligns with your business plan to effectively manage your costs.

Professional Services

Starting a business involves plenty of paperwork, especially if you are starting your business with partners. Legal representation is key to staying in compliance legally while also protecting all business owners. Bookkeeping services can also save you time and money since your financials will be up-to-date and compliant with current reporting and tax filing requirements. Utilizing these services is an investment, one that can save you hassle, fines, and more in the long term.


Today, businesses can’t survive without software, such as accounting software, inventory software, and POS systems. With a growing number of software options online, you can find the right software to fit your needs and your budget.

While these common costs might not apply to every business, this gives you a roadmap of what to expect in terms of business startup costs. But how can you properly account for these costs and thus manage your capital effectively during those early days of your business?


How to Properly Account For Your Business Startup Costs As You Grow

During the early days of your business, you are spending capital in multiple areas. How can you avoid having incomplete financials? Here are a few tips:

  • To avoid missing transactions, utilize a virtual bookkeeper. They can go over bank statements, credit card statements, invoices, and payroll to make sure that all your transactions are included in your financial statements and categorized properly.
  • Amortizing your costs to maximize any benefits that could reduce your tax liabilities.
  • Tracking your business expenses to determine where money is being spent, what your overhead costs are, and where you might need to invest some capital.
  • Recognize that some costs will be fixed and occur when you first open your business but that other costs, such as office space and utilities, will be recurring costs.


By understanding the importance of tracking your expenses and income, you give yourself the tools to understand the financial health of your startup. Tracking all your expenses related to the business can also benefit your tax liability since the IRS allows you to deduct up to $5,000 ins startup and organizational costs in the year your business becomes operational.

How can you properly account for all your costs? Start by setting up your accounting software and determining whether you will use a cash basis or accrual accounting system. Every transaction where you spend or receive money related to the business needs to be recorded there. Not sure what to include or how to categorize it?

Working with a virtual bookkeeping service can give you the expertise you need to keep your financials in order. With that in mind, let’s talk about accounting software and how it can play a role in making your bookkeeping successful.


What Is the Best Accounting Software To Use?

There are plenty of accounting software options available, so finding one will depend on the specific needs of your business. Here are a few areas to consider before you pick your accounting software:

  • Does it offer options to grow as your business transactions increase?
  • Does it specialize in startups within your industry?
  • Does it offer payment processing options?
  • Does it offer invoicing methods?
  • Can you expand to include payroll or bill pay?


business startup costs


Since not all accounting software is geared toward small businesses, it is essential to understand what is offered and whether you can use the software in conjunction with your bookkeeping service.

Choosing the right accounting software will make it easier to grow your business while giving you the data to make critical choices regarding capital investments, marketing, and more.


What Are Ways That You Can Save On Your Startup Costs?

Starting a business can be expensive, and owners are always looking for the best ways to stretch their budgets while maximizing the benefits for their business. Here are a few of the ways you can save on your startup business costs.

  • Shop around – Many of your expenses can be reduced simply by shopping suppliers, vendors, and providers. Don’t be afraid to negotiate prices, especially with your suppliers and ask for those discounts.
  • Training – Consider keeping training sessions to just a few times a year. Maximize the training sessions by being more intensive and detailed.
  • Embrace technology – Today’s technology offers plenty of ways to allow your team to connect while minimizing the number of meetings necessary to get things done. Using these software options can increase productivity while keeping everyone up to date on the status of projects. You can even include your clients, looping them into the process and minimizing expenses for travel and meetings.
  • Outsourcing – Using virtual bookkeepers and outsourcing other administrative aspects of your business can help you to reduce staff costs while maintaining the adaptability of your business.
  • Grants – Governments, at the local and state level, are all trying to bring in new businesses to boost their economic development. Look around your area and see if there are any grants or tax breaks that your business might qualify for.
  • Watch your debts – In the early days of your business, it can be easy to borrow your way through the early days, but that can put pressure on you to increase sales faster than your business can handle. Instead, rely on your sales to give you the revenue for additional investment instead of borrowing before your business is able to handle the debt payments.


Managing your startup business costs involves being aware of where you spend your money and making sure you are getting the most out of every dollar. It can be tempting to get all the bells and whistles when you first open your business, but that can also increase your costs. Instead, focus on what your business needs right now to operate, thus keeping your expenses in line.


5 Final Tips For Managing Your Business Startup Costs

No matter when or where you start your business, you will have small business costs. The question is how to manage those costs effectively. Here are 5 ways that every owner should utilize to manage their business costs in the early days.

  • Virtual office – Why rent space if you can work from home and connect with your employees in their home offices? Plus, you can deduct a portion of costs related to your business on your personal taxes.
  • Consider freelancers – With today’s freelance workforce, you can tap into a variety of skills, while only paying for the tasks you need done.
  • Utilize a marketing service – While you might think it is easier and cheaper to do your own marketing, you could actually be slowing down the growth of your business. Outsource the marketing so you can focus on giving your clients a quality product and service.
  • Avoid long-term hiring – As a startup, you are still determining what skills you need on the team. Using freelancers can help you fill in critical gaps in the short-term, allowing you to see if this position will be necessary as your business grows.
  • Is there an app for that? – Today’s technology offers plenty of ways to do things faster, cheaper, and with less individuals involved in the process. As you look at your small business, see if there are ways to streamline your process by employing technology over another employee.


Keeping small business costs in line takes work and a willingness to stick to the budget. Your processes in the early days might not be well-organized, but as your business grows, focus on ways to increase efficiency to streamline costs. Being aware of how money is being spent can also help you to compare those costs with industry standards. If you are out of line, then it might be worth digging deeper into your expenses.

Regardless of whether your small business is online or has its own brick and mortar location, you need a bookkeeping service that understanding the challenges of starting a new business.


business startup costs


What Is AccountsBalance?

AccountsBalance was founded by Nathan Hirsch and Connor Gillivan after realizing a major need for a reliable bookkeeping service for online companies. Our goal is to build a long-term relationship with you, so you have a reliable bookkeeping partner from startup through acquisition. We help you get accurate numbers to make smart financial decisions.

We believe in digital forward companies, recognizing the benefits of working with the best, not matter where you are located.


In Summary

Starting a new business has unique challenges, but managing your financials shouldn’t be one of them. By focusing on where your moenty is being spent and investing in the right areas, you can help your business to grow successfully. Are you ready to get your finances, including your business startup costs, in order? Our bookkeeping team can help you get on the right track today!


Want help with your bookkeeping? We make it easy. Get startedSpeak w/ a Founder, or Schedule a Callback

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Tracy Knepple

Tracy Knepple

As a writer and editor with 20+ years experience, Tracy Knepple offers practical tips and analysis on accounting, bookkeeping, small business, and many other topics. She has authored over 100 books as a professional writer for the Raymond Aaron Group. She received her Bachelor's degree in Communications from Indiana University.

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