How Much Money Do You Need to Start a Business?

Get an in-depth understanding of how much money you need to start a business, considering various costs. Learn how to manage expenses and your options.

June 12, 2024
How Much Money Do You Need to Start a Business?

How much money do you need to start a business? It could be anywhere from a few hundred to a few million dollars, depending on what type and scale of start-up you’re planning. 

To open a McDonald’s franchise, you’ll need between $1.3 and $2.4 million, including $500,000+ in liquid assets.1 If you’re starting a home-based or micro-business with no inventory, staffing, or equipment needs, you can squeak by without significant cash in hand.2

While there isn’t a single cookie-cutter answer to how tall your pile of money needs to be to fund a new business, we’ve rounded up the typical cost categories with some estimates and calculations as a starting point for a potential small business owner. 

Essential Costs to Consider

Once you’ve finalized a business plan and decided on a business structure, you’re ready to consider financing and initial costs. 

Business Registration and Legal Fees

If you opt for a limited liability company or corporate structure, you’ll pay $50 to $725 in fees to file articles of organization or incorporation at the state level (under $300 in most states).2

Depending on your business type, you may also need to cover fees for federal or state licensing or permits such as sales tax or industry-specific licensing. 

Unless you opt for sole proprietorship, plan on consulting legal, tax, and finance professionals, and purchasing business insurance, before finalizing your business structure and articles. 

Per year, business insurance averages $1,200 and can include:2

  • General liability – $400 to $800 
  • Commercial property – $300 to $2,500+ 
  • Errors and omissions – $2,000 to $5,000 

Equipment and Infrastructure

Equipment is often the most expensive category for start-up costs, typically costing $11,000 to $125,000.3 Research similar businesses to identify what kind of equipment and infrastructure—the systems and surroundings necessary to run your equipment—will be needed. 

Marketing and Advertising Costs

As an ongoing expense, plan to spend no more than 10% of your total budget on marketing costs.2 Depending on the type, industry, and scale of your business, your launch marketing could be either lower or higher. 

A small business owner may need to invest in initial marketing costs such as: 

  • Logo design
  • Signage
  • Identity materials (business cards, letterhead, etc.)
  • Website design and launch
  • Ad design and templates
  • Marketing and advertising consultation

Online Marketing

Small business start-ups can keep costs low by sticking to social media and small-dollar digital advertising, plus about $40 per month for a basic website.2

As you grow your customer base and become a successful business, you may want to consider: 

  • Email marketing
  • SEO and content marketing
  • Lead generation
  • Account-based marketing

Traditional Advertising

Don’t discount traditional advertising, particularly if you’re after a local customer base. This can include: 

  • Tradeshows and events
  • Ads in newspapers or coupon packets
  • Direct mail
  • Radio and television spots

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Operating Costs and Overhead

You’ll typically want to cover six months of operating expenses in your start-up fund, so tally up all the fixed costs and variable expenses you can anticipate to establish a monthly figure. 

  • Inventory and/or raw goods and materials
  • Software and SAAS subscriptions
  • Shipping
  • Office supplies
  • Loan and business credit card repayments, interest, and fees
  • Taxes
  • Training, books, and periodicals

Commercial Space and Utilities

Monthly commercial space rental is between $100 to $1,000 per employee.2 The cost will depend on location, activity/usage, type of space, and amenities and desirability. 

For utilities, expect to pay about $2.10 per square foot for commercial buildings or office space.2

Salaries and Wages

If you’ll be hiring employees, you’ll need a larger start-up fund. On average, employees cost: 

  • $41.03 to $43.26 per hour for non-government employees3
  • $0.75 to $2.74 for each $100 of payroll for workers compensation insurance2
  • $4,000 to $20,000 to add a new employee (hiring, administration, training, etc.)

The Small Business Administration recommends multiplying salaries by 1.25 to 1.4 times the rate of pay to account for taxes, benefits, and salary. 

Truehold's Sale-Leaseback Option

For many Americans, equity is the most valuable asset in their portfolio, but they don’t realize home equity can be used to build wealth. It can be leveraged—to fund your dreams, such as a new business, education, or cover critical needs—without taking on a small business loan, new debt, or moving out and finding a new home. 

Wondering how to raise money for a business without a loan? A residential sale-leaseback allows you to convert all of your equity to cash without taking on debt or leaving the home you love. With Truehold's sale-leaseback, you sell to us, a trusted residential real estate and services company, and sign a lease at closing that enables you to continue living at home as a renter. This way, you can fund your new business, debt-free.

For many homeowners—including small business owners—the sale-leaseback arrangement lowers their monthly housing total cost. No more homeowner’s insurance or property tax bills, and Truehold handles the expense and headaches of major repairs and maintenance. Not to mention, you skip the hassle of a traditional home sale.

Ready to learn more? Give us a call at (314) 353-9757 and one of our advisors will reach out to review the process, answer your questions, and see if Truehold's sale-leaseback can help you reach your financial goals.


  1. The Wolf of Franchises. McDonald's Franchise: Costs, Fees & Earning Stats.
  2. NerdWallet. 14 Business Startup Costs Business Owners Need to Know.
  3. Bankrate. Average cost of starting a small business.
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Written by
Nicolas Cepeda
Financial Analyst at Truehold - A Specialist in Real Estate Finance
Nicolas Cepeda specializes in financial analysis and strategic portfolio management, with a keen focus on innovative residential real estate solutions. He leverages this expertise to cover pertinent topics in the real estate and financial sectors.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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