How to Calculate Startup Costs with Examples

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Getting a handle on your start up budget

Do you have time to make a financial plan for your startup? Or are you struggling with estimating start up costs? Without a budget you could find yourself paying much higher costs than you can bear. Not being able to cover the operating costs of a business can be a barrier to entry for some startups until they start to see healthy profit margins. But don’t worry! In this guide I’m going to make it easy for you to capture all your costs so you can create a complete budget to run your business from.

When estimating start up costs, the first thing to understand about your business costs are which are variable costs and which are fixed costs. Here’s the difference:

  • Variable costs – change depending on how much you sell. Variable costs are most often direct costs related to a sale. The income from sales, minus any direct costs gives us the business’ gross profit.
  • Fixed costs – are not directly related to sales. Fixed costs are the business’ operating expenses – costs that usually remain the same, or similar for the foreseeable future. Income minus direct costs and fixed costs gives us the business’ net profit.

The other distinction you need to be aware of is between paying an expense (a cost) and purchasing an asset. Both involve capital expenditure and getting something in return – and there can be cases where it’s borderline whether something is classified as a cost or an asset purchase. As a general rule, assets are things which have lasting value, that you could sell to pay off a debt. Costs, by contrast, are paid in exchange for goods or services.

What do you need to include when estimating start up costs?

The short answer is – all of them. Creating a plan or budget is all about reducing the financial risk the business could face in the future if it cannot pay its debts. There are a lot of costs your business may incur that aren’t directly related to the sales you make, and it’s important to take them into account.
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Fixed Costs:

When estimating start up costs, there are a number of fixed costs that you will be able to plan for. We’ll run through a few below.


If you have a website, there are initial costs to pay – the cost of site construction, design, domain purchase, etc.

Brand Development  (name, logo & so on)

Your brand is how customers first see you and how they remember you – you may need to get professional branding advice or hire a designer.

Building Improvement

Extensions, upgrading workspaces and furnishing tearooms – if your business’ premises need certain physical characteristics you will need to budget for this. This includes labour costs as well as the cost of materials.

Business Cards/Stationery

Business cards and stationery are best ordered in bulk. Don’t forget the cost of any design work for your business cards – think ahead so you don’t need to change them all the time!

Business Licenses/Permits

Different industries have different requirements here – but it’s certainly a necessary cost!

Computer Hardware/Software

Remember, you don’t just need a computer, think about printers, mice, cables, routers – and you’ll need software too. The costs of multiple licences add up, so consider what you need carefully.


If you have a shop-front, giving the premises a fresh lick of paint can help solidify your brand. Or you may wish to give a dated office a more modern vibe – either way – you’ll need to pay a decorator (or do it yourself) and pay for materials.

Franchise Start Up Fees

If your business is part of a franchise there will usually be start up fees to pay in order to benefit from the franchise’s brand and support.

Internet Installation

Setting up business internet is not like setting up home internet… be prepared for considerably higher costs.

Rental Deposit

While you will in theory get this money back at some point in the future, the deposit on some properties can be high – don’t get surprised by this cost!

Legal/Professional Fees

Setting up a business may require you pay for financial or legal advice.

Machines & Equipment

From bakery ovens and industrial welders to the office kettle, you’ll need to budget appropriately for the equipment your business will need to run smoothly.

Office Furniture/Fixtures

Lighting, electrics, sockets, desks, chairs, cupboards – think about what your business will require on a day-to-day basis and the number of people you will employ.

Operating Cash (Working Capital)

The business needs cash in order to pay unexpected bills, or even expected bills if it doesn’t have cash from sales to cover itself.

Point of Sale Hardware/Software

Barcode scanners, tills and associated software.


Sometimes insurance is an annual cost. If your business is changing or growing rapidly don’t forget to check the consequences for your insurance and make sure you are still covered.

Security System Installation Setup

You may need to consult with a security system provider and install a system to protect your business.


A quality sign in a prominent location can go a long way towards spreading your brand. Interior signs can also enhance the image of a business.

Starting Inventory

Before you can sell any goods you (may!) need to purchase them from a supplier. Consider how much you will need to cover for an initial period before you will need to restock.


Do you need to call abroad? Do you need call monitoring? Headsets for support staff? Definitely consider your telephone requirements as a business and plan accordingly.

Tools & Supplies

Printer paper, drills, cleaning chemicals… draw up a full list of the tools of your trade and ensure you cost it all out.


Budget for travel, including food and board if necessary.


The costs of purchasing, running and insuring a vehicle need to be part of your plan – as well as contingencies for if the vehicle requires repair or replacement.

Monthly Costs:

In addition to your fixed costs, when estimating start up costs you need to account for monthly or variable expenses – we’ll provide a few examples below:

Advertising costs

Marketing costs – including the cost of print media, billboards, paid search (adwords), website adverts, etc.

Business Insurance

Whatever your business you should have insurance to protect the business from common issues.

Business Vehicle Insurance

It goes without saying – if the business owns vehicles, they need vehicle insurance!

Employee Salaries and Commissions

Salaries, National Insurance payments, bonuses and payments by commission – ensuring you can pay your staff (and pay them on time) is an absolute necessity.

Equipment Lease Payments

For equipment that you don’t own outright, you may have to pay regular lease payments.


How much inventory you buy may be based on the amount you are selling – so if you are predicting booming sales don’t forget you will need to increase inventory spending substantially.

Raw Materials

If you make products rather than resell them the same applies as with Inventory – predicting increased sales should go hand in hand with an increased business demand for materials. There may also be manufacturing costs associated with these materials – either at your end or your supplier’s.


These may be ordered on a case-by-case basis, or as a regular restock. In either case, consider the average spending on parts per month.

Franchise Fee

If your business is part of a franchise paying this fee is one of your top priorities.

Health Insurance

The nature and level of health insurance you offer is something to think carefully about. Make sure you budget an appropriate amount for this, especially if your team is expanding.


With employees now being auto-enrolled, you need to consider how much of a contribution you are making to staff pensions, and budget for increases in this amount over the next few years.

Internet Connection

High-speed internet is a must for some businesses, and offering free wi-fi is expected in others.

Loan and Credit Card Interest & Principal

Repaying your debts is a necessary part of borrowing – ensure that you can afford the money you borrow!

Legal/Accounting Fees

Regular fees for professional services. This might include chasing invoices, running payroll or numerous other activities.

Merchant Account Fees

If you are selling through a vendor, payment gateway or reseller these organisations usually take a fee, either flat or % of sale for their service. If you are predicting increased sales volume don’t forget you may need to increase the amount you are paying in merchant fees.

Miscellaneous Expenses

Anything not listed in this list! Don’t forget to budget for this – look at previous average expenditures for the business if it has any, or consider what extra expenses you may need to pay for.

Mortgage Payments

The good thing about a lot of mortgages (at the moment!) is that the costs don’t fluctuate much, so this should be easy to budget for in the short term.

Lease Payment

Any lease agreements you have will require fixed payments, making this easy to budget for.

Owner Salary

If you’re the business owner, don’t forget you need to get paid too! Depending on your circumstances you may wish to take a high or low salary from the business or extract money in other ways.

Payroll taxes or Self-employment tax

These taxes are linked to the salaries of your employees – consider how pay rises or new hires will increase your required tax spending.

Postage/Shipping Costs

If you deliver products then you will have shipping costs. Even if these costs are covered by the customer, you need to ensure that you can pay them in case customers pay late.

Security System Monthly Payment

This should be a fixed monthly fee, and easy to budget for.


Paper, coffee, fruit, sundries… businesses often have small monthly costs like these. They may well increase if the business hires more people.


Unless you are in the habit of making expensive calls that aren’t covered by your telephone deal this should be a stable price and easy to budget for.


Travel costs can go up and down depending on how far you need to go to meet your customers. Take what you think is an average figure, but ensure that you have ready cash to pay for higher travel costs on some months. If possible, budget in seasonal increases and falls in estimated travel costs.


Gas, electric and water. Heating and water costs are going to vary depending on your business type, so make sure your estimates are based on businesses similar to yours.

Website Hosting/Maintenance

Monthly charges for website hosting, maintenance, security work, etc can add up. This should be a steady cost, unless you need any ad hoc work done for the site.

But don’t be overwhelmed!

Phew! That was a long list! Don’t be overwhelmed. Gather all of your research and numbers together in a workbook (a Word document or Excel spreadsheet is best). Estimating start up costs doesn’t have to be stressful if you take it step by step.

When you’re ready you can use cash flow forecasting software like Brixx to project these figures forward and plan your finances in depth.

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