As a new entrepreneur or a seasoned entrepreneur, knowing how much money you need to start a new business idea from scratch is very important. This can save you so much headache at a very crucial point in your business and will prevent the feeling of being stuck and giving up on a very brilliant idea. So, ‘how much money do you need to start a business from scratch’ is the question entrepreneurs never stop asking, just as someone planning to build a particular type of house will also ask how much he or she needs to build the house completely from scratch.
In this guide, we will learn the direct answer to this question, and also learn what it really means to start a business from scratch, break down the real cost of starting a business step-by-step, how much you actually need step-by-step, some common startup funding sources for entrepreneurs, how industry type affects your startup cost, smart ways to minimize startup cost, how long your startup money should last, and examples and real world startups and their cost range.
How much do you need to start a business?
The short and clear answer to this question is that there is no fixed or allocated budget standardized for entrepreneurs to have in order to start a business from scratch. Why? Because every business is different and every entrepreneur wants to start a business on a different condition and scale. Some entrepreneurs want to start a small business while others want to start it big. Some entrepreneurs might own a space to start a business, so they will not have to factor that cost into the startup budget. This makes the cost of starting a business very different.
That being said, there is a step-by-step method you can follow to arrive at the reasonable figure tailored to suit your type of startup business, the size of your startup, the location of your startup, and even the distinct condition under which your startup desires to start from. We will discuss them in this detailed guide.
Understanding What It Really Means To Start A Business From Scratch
First of all, let us understand what a business startup is. A business startup is an emerging company in its early stages, which is started by an individual or a group of people, with the intention of solving a particular problem or making a profit, or achieving both intentions.
Therefore, starting a business from scratch means you are starting a business from the very beginning without using any previous work done or relying on a previous foundation for your business assistance. This usually starts from the idea level. No prior work has been done for you as a foundation to build your business upon.
So, if anyone is starting a business from scratch, you must know that you are starting the business from the point where no form or part of the business exists. And you have to bring the idea to life. For this reason, some new entrepreneurs or existing entrepreneurs will either wait till they are prepared financially or learn and prepare along the business journey.
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Breaking Down The Real Cost Of Starting A Business from Scratch
It is very easy to sit down and think about the possible cost of a business startup and believe that you have all the costs figured out. Then you realize there are more hidden costs in the business that you were not aware of. And those that you were aware of keep changing almost every day. Below is a breakdown of some of the costs you are more likely to encounter as you plan to raise your business from scratch.
Fixed Startup Cost and Variable Startup Cost
It is very crucial to understand the difference between fixed and variable startup costs if you are planning the cost of starting a business from scratch. Understanding these two types of costs or expenses will determine how flexible your budget is and how well your business can survive in the early months
Fixed Startup cost: this is a type of expense that stays consistent regardless of how much business you do. This type of expense does not change whether or not you sell one or a million products, or whether you are making a profit or not. For instance:
- Store or shop rent cost: Your shop rent cost remains the same whether you sell a product or not. It stays the same for a period of time until a new tenancy agreement is made to adjust the price. Even after the agreement, the price will stay consistent until another agreement is made.
- Salary of your Full-time Employees: Whether employees’ salaries are scheduled weekly or monthly, it usually remains the same until a new payment structure is prepared, then changes will be made.
- Insurance premiums: Business insurance, business liability coverage, usually remain the same no matter how many sales you make.
- Licensing and permits: Acquiring or renewing licenses and permits is the same and predictable regardless of how much business you do.
See fixed startup costs as expenses that are predictable. When it comes to the time of spending on that part of the business, you know how much it will cost you. These costs serve as a cushion for your business,, but they also require consistent revenue to be able to handle them. Too many fixed costs in your business can drain your business, especially if you are not generating enough revenue to cover them.
Variable startup cost: This type of startup cost varies, as the name suggests. It arises when the business is booming, and you can pull back or slow down when the business slows down. This type os cost changes depending on how much business you do. For instance:
- Electric or energy bill: energy bill rises when production is high, and goes down when production is down.
- Raw materials or inventory: When the business is going well, you tend to spend more money on raw materials to match production demand. On the other hand, you spend less on raw materials or inventory when production is low.
- Marketing or Advertising: Ad budget can be increased or reduced as the startup desires
The table below compares fixed startup costs and variable startup costs.
| Expense Type | Category | Typical Monthly Cost (USD) | Notes |
| Website hosting & domain | Fixed | $30 | Paid monthly regardless of sales |
| E-commerce platform fee | Fixed | $50 | Subscription-based |
| Business insurance | Fixed | $40 | Annual premium averaged monthly |
| Product inventory | Variable | $500–$1,500 | Depends on sales volume |
| Shipping supplies | Variable | $150–$400 | Increases with order volume |
| Advertising spend | Variable | $200–$800 | Adjusted based on marketing goals |
| Freelance graphic design | Variable | $100–$300 | Hired as needed |
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One-time Costs You Can’t Ignore
These are more or less required business operational costs that you have to do once in order to operate your business peacefully or successfully. This includes business registration costs, business permit costs, branding costs, and legal expenses. You make a budget for this cost once, and you are good to go. As a small startup, you may not be required to get legal backing, but getting one at the very early stages will give your business so much confidence to operate, and save your startup from legal matters, you do not expect.
Ongoing Operational Costs
Ongoing operational costs cover recurring operational expenses. They are the costs you incur to keep the business going. Without these expenses budgeted for, the business will hardly, if at all, remain in operation. These expenses include salaries, inventories, start ups, software, subscriptions, and others
I believe by now you can already tell that some of the expenses appear in more than one category. For instance, salary costs appear to be fixed and also an ongoing cost. Just as inventory, which is a variable cost and an operational expense at the same time. The idea here is not just knowing which category an expense belongs, but being able to manage it effectively so that it does not appear as a startup business liability.
Estimating How Much Money You Actually Need To Start A Business
Being able to estimate how much money you need to start a business is as important as being able to bring the business idea to its early stage. As there is no fixed amount to start your startup business, there is no need to aim at having a perfect budget for your business. Even large corporations cannot provide an exact budget for their annual expenses, even though they have been in operation for decades. To be able to determine how much money you need to start the business, you need to first:
- Calculate your business startup budget step-by-step
- Determine your Minimum Viable Capital (MVC)
Calculating Your Business Startup Budget Step-by-Step
Estimating your startup budget does not imply that that is the only amount of money you have to spend to start your business. It gives you an idea of how much money you will need if all the mentioned expenses are met. Furthermore, the budget helps you spend your money within the budgeted amount so that you don’t overspend or you don’t find some prices shocking when you hear them for the first time. Below is how to calculate your business startup budget step-by-step:
1. List All Your Expected Expenses
Start by thinking about everything you necessarily need to start up the business and write them down. They can be office space, machines, laptops, inventory, energy, and others. Stay focused as you can easily be carried away when you are picturing the future of your business instead of the startup state. Lack of focus can result in listing things that you don’t need at the early stages of the business.
2. Estimate Each Cost Accurately
Categorize every potential. Group them into either one-time costs or recurring costs. It is very important to be able to capture the current market price, or if possible, the immediate future price of all the items and services you will require for your business, rather than the previous market price. The last thing you don’t want is to buy things more expensive than you actually budgeted for. You will either halt on the way to begin to feel like giving up. Make sure you get the accurate estimates of the things you wrote down in step 1. Also, be sure to add a 10%-15% buffer to cover unexpected costs
3. Determine Your Startup Operating Runway
Startup runway is the amount of time your startup can operate successfully before needing another cash. Determine how long you will want to run before any new funds come in. A 6-12 month startup runway is ideal for most startups. To arrive at your desired startup runaway cost, multiply your monthly operational cost by how many of months you want to stay cushioned without extra operational funds for your startup.
4. Choose A Budgeting Tool
A simple budgeting tool, such as a spreadsheet, is good for helping you track your expenses. You can also use other options, such as QuickBooks, Notion, or Google Sheets, for complex businesses to help you track your expenses and forecast cash flow.
5. Combine Everything Into A Total Startup Budget
Add up your setup expenses, monthly cost, and runway expenses to make up your initial funding target.
| Expense Category | Estimated Cost (USD) |
| Registration & licensing | $400 |
| Equipment & tools | $2,500 |
| Website & marketing | $1,200 |
| Initial inventory | $3,000 |
| Operating capital (6 months) | $12,000 |
| Total Estimated Startup Budget | $19,100 |
How to Determine Your Minimum Viable Capital (MVC)
After you make your complete budget for your startup, you get a bigger picture of the full amount you need to start and operate the business. However, not everyone has that amount of money readily available to pump into the business. This is where Minimum Viable Capital (MVC) Comes in.
Minimum Viable Capital is the minimum amount of money you require to lift a startup off the ground and start operating to the point where you start making a profit. This capital does not necessarily cover everything you listed in your budget, but the most vital things you need to start operating your startup and start making a profit.
Think about this as the financial version of Minimum Viable Product (MVP); the simplest and smallest version of your business, but it can still offer value to its customers. To be able to determine your minimum viable capital, you need to:
1. Determine The Core Value Of The Business
Ask yourself “what is the minimum setup I need to start selling a product or service to customers?” Every minimum setup varies depending on your type of business. A manufacturing business might need a production space, machines, raw materials, and so on. An online business will not require a physical space but rather a laptop, internet connection, a website, and a marketing budget.
2. Prioritize Essential Needs Over Extra Needs
You need to list your expenses again and pick out the critical ones you will need to start functioning. Be sure to cut out any other setup ideas or features that will be good to have but not a priority. For instance, if you are setting up an online business, it will be nice to have an office, but it is not a critical expense you need to function because you can work from home. This selecting stage is very crucial in differentiating between the things you need to function as a business and the things you need to develop your business.
3. Estimate your minimum Runway
Determine the amount of time (in months) you want to operate the business before you start looking for new funds. Knowing your startup runway will give you a fair idea of how much you need to stay cushioned throughout the runway
4. Validate Early And Reinvest
As soon as you start making a profit, reinvest your profit into the business. Upgrade your setup, tools, or high-part-time hands that can increase production. This is a smarter way to grow reasonably without incurring any huge debt.
5. Review And Adjust Regularly
Your minimum viable capital must not remain fixed, as your business changes and takes shape, revisit your initial budget and see parts of the business or the product where you can improve. Review if you can provide a cheaper option for the product you offer.
Common Sources Of Startup Funding For Entrepreneurs
In this new age of doing business, there are many sources of startup funding for your business from scratch. As long as you meet the criteria of some funding organizations, you can acquire startup funding without any strings attached. Here are some common sources of funding for your startup from scratch:
Self-funding And Bootstrapping
Self-funding is a type of funding where the source of funding is from yourself as the founder of the startup. It could be from your personal savings, credit cards, or some investment initiatives you took earlier. Bootstrapping refers to using a minimal amount of funding to operate a business without any external funding support.
Self-funding a startup is a very good idea and is recommended for businesses starting from scratch. This is because it takes away investor pressure from your shoulders. Funding your business is a good practice and comes with a lot of benefits, such as having complete expense control over all your profits.
Loans, Grants, And Investors
Loans are usually given by banks or funding organizations just for temporary support, and then you pay the amount given to you. Grants are the funding you are given to invest in your business without paying back. Investors can invest in your startup with the intention of making profits as your business grows. They also expect you to pay back at some point of your business. Some organizations that give grants for your business include:
- D-Prize Global Competition: They offer up to $20,000 seed grant to startups that are fighting poverty and are from low-income and developing countries.
- EIC Accelerator (Europe): This is a significant source of funding for startups, offering up to €2.5 million, competing equity investment.
- 2025 Seed Grants: They offer grants ranging from $2,500 to $600,000, and are directed to startups that focus on fintech, healthcare, women entrepreneurship, and energy solutions
- Santander X Cultivate Small Business Grant: This grant is up to $13,000 with mentorship for startups owned by women, BIPOC, and immigrants to support diverse founders.
- Small Business Innovation Research (SBIR): This grant is given by the U.S. states and federal government, like Illinois, fostering tech development and job creation.
Crowdfunding and Digital Funding Avenues
Crowdfunding is a source of funding where individuals or groups who believe in your course or vision donate different amounts of money to support your business idea. Crowdfunding and online business funding are a stress-free way of getting free money to back your startup idea. Some common crowdfunding websites include Kickstarter, Indiegogo, GoFundMe, Crowdcube, Seedrs, StartEngine, and Patreon
Smart Ways to Minimize Startup Costs
As a startup or a small business aiming to grow, it is very important that you minimize your cost of doing business, especially when you have a limited financial backing. Overspending is not a sign that you are doing well in business. Hence, there is a need to minimize startup costs so that you can achieve more with the little funding you can lay your hands on. Here are smart ways to minimize startup costs without compromising quality or growth.
Start Lean And Scale Smart
A lean startup is a startup with low financial backing. Lean startups tend to replace lavish spending with smartness. A heavily funded startup will recruit more staff than necessary or spend money on advertising. Whereas a lean startup will take on extra duties and use the rest of the funds to develop the product and improve customer experience.
Start with the lean startup principle. Spend less and develop alternative means to achieve good results without spending more, so that you can scale the business and minimize startup costs.
Using Technology to Reduce Overhead
We are blessed in this modern age with technology. Use technology to cut down on extra costs. Automate tasks, utilize software that reduces long delays, and leverage technology to minimize extra staff and startup overhead. Overhead is a cost of doing business that is not directly related to producing a product or service. Furthermore, using digital tools reduces staff over-reliance, lowers business expenses, and minimizes human errors.
Real-World Examples and Startup Cost Ranges
This table provides a brief insight on some common startups and their cost ranges.
| Type of Business | Business Model Summary | Estimated Startup Cost Range (USD) | Key Cost Drivers | Lean Startup Tip |
| Freelance Consulting or Coaching | One-person service business offering expertise (e.g., marketing, fitness, business strategy). | $500 – $3,000 | Certification, insurance, equipment, and marketing | Start with free scheduling and invoicing tools; use social media instead of paid ads. |
| E-commerce Store (Dropshipping or Print-on-Demand) | Online retail without managing inventory; products fulfilled by suppliers. | $1,000 – $5,000 | Website setup, ad spend, platform fees, product samples | Test ads on a small scale; reinvest early profits into brand assets. |
| Home Bakery or Catering Business | Small-scale food business run from home or shared kitchen. | $3,000 – $10,000 | Equipment, ingredients, packaging, permits, branding | Begin with local pre-orders before renting commercial space. |
| Mobile App Startup (Tech Product) | App-based digital service or marketplace. | $10,000 – $150,000+ | Development, testing, design, hosting, marketing | Launch an MVP (minimum viable product) to test user demand before full development. |
| Coffee Shop or Small Café | Brick-and-mortar food and beverage business. | $50,000 – $200,000 | Rent, renovation, equipment, licensing, staff, furniture | Start as a coffee cart or pop-up stand to build brand awareness with lower costs. |
| Online Content Creation / YouTube Channel | Ad- and sponsorship-driven digital content platform. | $500 – $5,000 | Camera, lighting, software, marketing | Use your phone camera and free editing software early on. |
| Cleaning or Home Services Business | Local service business (residential or commercial cleaning). | $2,000 – $10,000 | Supplies, transportation, insurance, licensing | Start small with residential clients and scale as reputation grows. |
| Fitness Instructor or Personal Trainer | Independent service business offering in-person or virtual training. | $1,000 – $7,000 | Software tools, marketing, website, and client acquisition | Offer virtual sessions to cut space rental costs. |
| Retail Boutique or Clothing Store | Brick-and-mortar fashion or accessories retail. | $30,000 – $100,000+ | Inventory, rent, interior design, staff, point-of-sale setup | Test your products online first before opening a store. |
| Digital Marketing Agency | Service-based online business providing SEO, ads, and branding services. | $2,000 – $15,000 | Filming gear, platform fees, marketing, and course design | Begin solo, use free tools, and outsource as client load increases. |
| Subscription Box Service | Curated product delivery model (e.g., beauty boxes, snacks, pet supplies). | $5,000 – $25,000 | Packaging, product sourcing, fulfillment, marketing | Start with limited editions or preorders to test customer interest. |
| Food Truck Business | Mobile restaurant operation with a flexible location model. | $40,000 – $120,000 | Truck purchase/lease, permits, equipment, branding | Lease or buy a used truck; partner with local events to gain visibility. |
| Online Course Creator / Education Platform | Passive-income model teaching expertise via digital courses. | $1,000 – $8,000 | Filming gear, platform fees, marketing, and course design | Use free hosting platforms (like Teachable or Thinkific) until revenue grows. |
| Hair Salon or Barber Shop | Local beauty service business. | $30,000 – $100,000 | Rent, furniture, tools, licenses, staff wages | Rent chairs or share a salon to reduce overhead. |
| Tech Hardware Startup | Company creating physical tech products (e.g., gadgets, IoT). | $50,000 – $500,000+ | Prototyping, testing, production, patents, marketing | Crowdfund your prototype to validate demand before full manufacturing. |
Conclusion
The question of “how much money do you need to start a business from scratch is subjective to the kind of business, the size of the business, and even the location of the business. There is no predefined amount stated as the minimum viable capital for any business. It depends on how well you utilize the funds you have to make the best out of it.
In addition, you don’t have to be the only source of funding for your startup if you have tried to save up and it is not working out. There are banks and other recognised organizations that offer loans and grants. There are also reputable websites that offer crowdfunding options to support startups come to life.
Do not let the amount of money you have stop you from executing your dream business. Adopt a strategy, and you can always make it happen.
Disclaimer: This is not financial advice. Just for informational purposes.
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