How Much Does It Cost to Start a Business in 2026?

Starting a business can cost anywhere from a few hundred dollars to several hundred thousand. The total depends on your business model, industry, and location.

That range matters. In 2024, 94% of small employer firms reported at least one financial or operational challenge, according to the Federal Reserve’s Small Business Credit Survey, with rising costs the most common. Understanding what startup costs to expect, and how to plan for them, reduces the risk of being caught off guard.

This guide covers typical startup costs by expense category and business type, plus ways to keep costs under control.

How much does it cost to start a business?

Startup costs are the one-time and ongoing expenses required to launch a business. They include office space, equipment, licenses and permits, insurance, inventory, employee salaries, and marketing. 

Total costs vary based on business type, size, and location. A home-based online store has a different cost profile than a physical storefront or a manufacturing operation.

Calculating startup costs before launch helps estimate profits, conduct a break-even analysis, secure loans, and attract investors.

“I’m not a financial wizard, but I know how to read a balance sheet and a profit and loss sheet,” says Bill Bachand, founder of Renu Therapy in an episode of Shopify Masters. “And I know where different charges get coded too so it all lines up. Because if you have good financials, then you can make good decisions.”

Typical startup costs for a small business

Here’s a breakdown of what various startup expenses look like in 2026

How startup costs vary by business type

The right startup budget depends on your business model. 

Startup costs vary significantly by business model:

• Online store: $1,000–$60,000
• Service business: $3,000 to $15,000
• Product business: $5,000 to more than $1 million
• Retail store: about $48,000
• Restaurant: $125,000 to $550,000

Online store

An online store has the lowest barrier to entry of any business model. Startup costs range from $1,000 to $60,000, depending on whether you’re running a dropshipping operation or building a private label brand with inventory. 

A dropshipping store can launch for a few hundred dollars—you’ll need a platform subscription, a domain, and marketing budget. A product-based ecommerce brand with custom packaging, photography, and initial stock generally requires substantially more capital before they can begin selling.

The largest variable cost is inventory. Unlike service businesses, online stores carry stock risk from day one. Platform fees, payment processing, and digital advertising are the main ongoing expenses.

Service business

Service businesses have the lowest capital requirements across all business types. Startup costs for service businesses typically run between $3,000 and $15,000, with many home-based operations often launching for under $5,000. The main upfront costs are business registration, insurance, and any tools or equipment specific to the service. 

There’s no inventory to carry and no storefront to lease. The tradeoff is time to revenue. Most service businesses take three to six months to build a steady client base, so working capital to cover personal expenses during that period is a key part of the budget.

Product business

A product business, one that develops, manufactures, or sources physical goods, sits between an online store and a retail operation in terms of cost. Costs vary widely by business model, but manufacturing businesses often require substantial upfront investment—the largest of any product business. One estimate places manufacturing startup costs between $550,000 and $1.35 million, including $50,000 to $100,000 for initial inventory alone. 

Not every product business requires that level of capital. 

“I had a fashion founder tell me you need a million dollars to start a fashion brand,” says Allegra Shaw, cofounder of Uncle Studios. “I was like, ’Yeah, I didn’t do that.’

Smaller-scale product businesses that source from third-party suppliers can launch for less, but product development, sampling, and packaging all add to the pre-revenue spend.

Cash flow is the central challenge. Product businesses pay for goods before they sell them, and that time between outlay and revenue is where most early-stage pressure concentrates. In a Shopify survey of store owners conducted in Q4 2025,** 43% of home and garden store owners reported struggling with cash flow management—the highest rate across all verticals surveyed. 

Retail store

A physical retail store typically requires more upfront capital than an online or service-based business. The average startup cost is approximately $35,300, according to Starter Story, though costs vary significantly by location, store size, and category.

Ongoing costs are also higher than other business types. Rent, utilities, and staffing create a fixed cost base that the business must cover every month regardless of sales. Location decisions are hard to reverse, making pre-opening research critical.

Jazzi McGilbert, founder of Reparations Club, calculated her worst-case fixed costs before signing her first lease. 

“If I sign this lease for a year, I know what the rent is,” Jazzi says in an interview with Shopify Masters. “If nobody walks in this space and buys anything, how much do I stand to lose? That was my business plan. I was prepared to lose it all.”

Restaurant

Restaurants carry some of the highest startup costs of any business type covered here.

According to a RestaurantOwner survey of more than 700 restaurant operators, the median opening cost was $275,000 and the average was $494,888, excluding land purchases. The middle 50% of respondents spent between $125,000 and $550,000 to open. Construction accounted for 47% of total startup costs, while kitchen and bar equipment cost $75,000. For restaurants that purchased land, the median startup cost increased to $425,000.

Restaurants also face a longer runway to profitability than most other business types, making working capital reserves a critical part of the launch budget.

Key small business cost statistics

Before you dive into figuring out how much it will cost to start your own business, let’s take a look at the small business landscape.

Common statistics to know

• Nearly one million new private sector businesses opened in the year to March 2025, according to the Bureau of Labor Statistics. 
• The Census Bureau reported 523,971 business applications in May 2026, continuing the elevated level of entrepreneurial activity seen in recent years.
• The Federal Reserve’s Small Business Credit Survey found that 75% of firms cited rising costs of goods, services, and wages as a financial challenge, while 57% reported difficulties reaching customers and growing sales.
• Keeping the business running was the primary reason firms sought financing. In the same survey, 56% applied for funding to cover operating expenses, while 46% sought capital to support expansion or new opportunities.
• Among startup businesses without employees, 77% used personal funds to address financial challenges.

Trends in small business expenses

Artificial intelligence to reduce costs

AI gives founders a way to scale without hiring staff. Some 8.8% of small businesses used AI as of mid-2025, up from 6.3% six months earlier, according to the SBA Office of Advocacy. The gap between small and large business adoption is narrowing as small firms increased usage more quickly than larger companies.

A January 2025 Ascend2 survey of 312 marketing decision-makers and marketing professionals, 37% identified content creation and enhancement as an effective AI-driven marketing tactic.

Shopify store owners have access to Shopify Sidekick, which can reduce the amount of time spent on store management tasks:

• Writing product descriptions
• Generating blog posts and page content
• Crafting email subject lines and marketing campaigns
• Answering customer FAQs through Shopify Inbox
• Removing product image backgrounds
• Generating store themes and custom theme blocks

Financial management goes in-house

One of the biggest regrets Aliyah Marandiz, founder of Sugardoh, says she has is not doing financial services in-house, when starting her business. 

“Instead, we hired fractional CFOs, which every time we hired a fractional CFO, they weren’t involved enough in the business to make a difference or to see the hurdles that were coming up,” says Aliyah in an interview with Shopify Masters. 

Aliyah says her first hire recommendation for new business owners is someone with expertise in finance or operations.

Build a startup budget before you launch

Learn the steps to creating a strong financial plan before you kick off your business.

1. List one-time and monthly expenses

Break your startup costs into two categories before spending a dollar.

One-time expenses are costs you pay once to get the business running: 

• Corporation filing fees
• Logo design
• Initial inventory
• Permits
• Legal fees for company formation documents

Monthly expenses recur every period: 

• Rent
• Salaries
• Software subscriptions
• Insurance

Plot both categories on a calendar for your first year. It helps you see when money needs to be available and avoid unexpected costs.

2. Research prices and vendor quotes

Once you have a list of expenses, research what each one actually costs. Some are straightforward; for instance, permits and licenses carry published fees. Others require direct contact with vendors to get a quote.

Use the cost data in the table above as a starting point. For everything else:

• Contact vendors directly and ask for quotes
• Take advantage of introductory discounts and free trials before committing to software or services
• Don’t be afraid to negotiate

Before budgeting for any expense, ask whether it’s essential—something the business fundamentally needs to operate—or discretionary. Advertising, for example, can accelerate growth, but isn’t required to launch. New equipment, large office space, and custom website design are common areas where founders overspend early. 

Look for ways to reduce upfront costs without sacrificing your ability to operate. For instance, Shopify’s free themes can eliminate the need for custom design work at launch. 

Some costs can be reduced further by doing the work yourself. When Ann McFerran started beauty brand Glametic, keeping costs low meant learning product photography rather than hiring a professional.

“If you want a professional photoshoot, prices can get really high, which is why I just learned how to do it by myself,” Ann says in an interview with Shopify Masters. 

A free business plan template can help you organize and document every expense before you launch.

3. Estimate costs by phase

Startup spending doesn’t happen all at once. Breaking costs into phases helps you understand when money will be needed and how much to have ready.

• Planning. Legal and administrative costs including business registration, licenses, permits, and any professional fees for company formation, are paid before operations begin. These are mostly one-time expenses.
• Setup. This phase covers the costs of building your store and sourcing your first products: platform subscription, domain, initial inventory or product development, packaging, and any equipment. Website design falls here too.
• Launch. Marketing spend typically increases at launch to build initial awareness. The SBA notes that businesses tend to allocate 7.7% of annual revenue to marketing—a useful benchmark when building your launch budget.
• First 12 months. Ongoing costs—rent, staffing, software subscriptions, insurance, loan repayments, and restocking—run throughout the first year. Having at least six months of operating costs reserved before launch significantly improves your chances of reaching profitability.

Jacob Winter, founder of home décor brand Mush Studios, reinvested revenue at every stage rather than raising capital upfront.

“Every dollar I put into buying the resources for the tufting gun and for the fabric and the yarn and the board,” Jacob says in an interview with Shopify Masters. “It took many weeks to save up for it, and then honestly, after every rug sale that I received after that, I put the money straight into the business.”

Danny Buck, cofounder of CRAFTD, cautions against scaling too fast before costs are understood.

“I went full on and tried to aim for the highest revenue,” Danny says in his Shopify Masters interview. “And the big mistake with that is if you get it wrong, you end up in debt, and then you need financing and you’re apologizing to people that you can’t pay anymore.”

Startup cost calculator and budget template resources

Tracking costs across multiple categories, including one-time expenses, recurring fees, ad spend, and inventory, is easier with the right tools. In a Shopify survey of store owners conducted in Q4 2025,** 37% cited marketing as their top challenge in the first year of their business.

Having a budget framework in place before launch helps you allocate spend across categories rather than making reactive decisions.

These resources cover planning, tracking, and ongoing financial management:

• Free business plan template. Shopify’s free template includes both a traditional and lean business plan format, with sections for company overview, financial summary, competitive analysis, marketing strategy, and logistics plan.
• Profit Calculator. A Shopify App Store profit calculator that tracks true net profit by order, product, and store. It pulls in cost of goods sold (COGS), shipping, taxes, transaction fees, refunds, and ad spend from platforms including Meta, Google, and TikTok. A 15-day free trial is available; paid plans are based on monthly order volume.
• Shopify Forms. Collect email addresses before launch and build an audience while you’re still developing products. 

Types of costs for your small business

Understanding how stable or unstable your expenses are helps with financial planning and pricing decisions.

Fixed costs vs. variable costs

Fixed costs stay the same regardless of how much you sell. Rent, software subscriptions, and insurance are fixed—they’re due whether you process one order or a thousand.

Variable costs change based on sales volume, customer demand, and supply chain conditions. 

They’re harder to forecast than fixed costs.

Variable cost examples:

• Packaging and shipping costs
• Raw material costs
• Office supplies
• Credit card fees
• Loan interest payments (if on a variable rate)

Knowing which costs are fixed helps you calculate the minimum revenue needed to cover your obligations each month. If your fixed costs total $1,500, that’s the floor your sales need to clear before you break even.

Direct costs vs. indirect costs

Direct costs are tied to producing and selling a product: raw materials, transaction fees, shipping, and inventory storage. They scale with revenue.

Indirect costs,meanwhile, are general overheads that stay roughly constant regardless of sales volume: web hosting, salaries, office supplies, and insurance.

Both feed into pricing and profit planning in different ways.

Direct costs determine your minimum viable price. If the cost of goods sold is $5 and you’re targeting a 40% profit margin, the item needs to be listed at $8.33 or higher.

Indirect costs set your break-even threshold. If it costs $250 per month to keep an online store running, the business must generate at least $250 in monthly gross profit before it turns a profit.

How to lower startup costs

Keeping early costs low reduces the capital needed to reach profitability. The tactics below are ways to lower startup costs. Results will vary by business type, market, and execution.

Start with a smaller product line

Launching with a focused product range limits inventory spend and makes it easier to test what sells before committing to broader stock. Waterboy, the hydration brand, launched with a single product and a $700 budget. The founders built an audience on TikTok before running a presale campaign to fund production.

Province of Canada took a similar approach. 

“We started with a few T-shirts and one crew neck,” says Julie Brown, cofounder. “The crew neck was the star.”

Test demand before investing in inventory or a full website

One of the most expensive startup mistakes is investing heavily in inventory before confirming customers actually want the product. Instead, test demand first. Presales, wait lists, marketplaces, and dropshipping can all help founders gauge demand before committing significant capital.

Shopify Collective lets store owners source and sell products from other Shopify brands without holding stock. Margins typically range from 20% to 50%. It’s a lower-risk way to test product-market fit before investing in your own inventory.

Use lower-cost tools early

Several recurring costs can be reduced or deferred at launch:

• Website design. Free themes on the Shopify Theme Store cover most launch requirements.
• Product descriptions and marketing copy. Shopify Sidekick generates both from within the Shopify admin.
• Customer FAQ management. The Shopify Knowledge Base app auto-generates store FAQs and customizes how AI shopping agents represent your business—reducing the need for manual customer support content.
• Accounting software. Use free options to handle basic bookkeeping until revenue justifies a paid tool.

Julie Brown kept the initial Province of Canada website simple.

“Our first iteration of the website was just a video,” she says in an interview with Shopify Masters. “We did a really simple video, but it got people’s attention.”

Delay discretionary expenses

Custom packaging, professional photography, and branded stationery are common early expenses that can wait. Ann McFerran, founder of Glametic, learned product photography herself to avoid professional shoot costs.

“If you want a professional photoshoot, prices can get really high, which is why I just learned how to do it by myself,” Ann says in an interview with Shopify Masters.

Prioritize organic channels before paid advertising

In a Shopify survey of store owners conducted in Q4 2025,** 36% cited finding customers as a top challenge in their first year. Organic channels including SEO, social media, and content require time rather than budget, and can build an audience before paid spend becomes necessary. 

Hidden costs to consider when starting a business

Not every startup expense appears in a business plan. These commonly overlooked costs can affect your budget and cash flow during the first year.

Common overlooked expenses

Licenses and permits

Most businesses need licenses or permits to operate legally. Requirements and costs vary by business type, industry, and jurisdiction. At the state level, a general business license typically costs between $50 and $550.

Costs increase significantly in regulated industries. Businesses selling alcohol need a liquor license, which ranges from $50 to more than $300,000 depending on the state, license type, and local quote restrictions. Healthcare, financial services, and childcare face similarly variable requirements. 

The SBA’s apply for a business license page lists requirements by state.

Shipping costs

Shipping costs increase with package size, weight, and distance. Overseas deliveries and expedited shipping add further. High return volumes compound the cost—each return shipment adds to the outbound cost of the original order.

Shopify Shipping includes pre-negotiated discounts of up to 88% from USPS, UPS, and DHL. Charging customers for shipping or setting a free shipping threshold are two common ways store owners manage the cost of shipping.

Staffing and insurance costs

Wages are the most visible staffing cost, but federal law requires every business with employees to carry workers’ compensation insurance, unemployment insurance, and disability insurance. 

State law may require additional coverage.

Beyond legally required coverage, businesses with employees commonly carry:

• Employers’ liability insurance. Covers claims from work-related injuries not covered under workers’ compensation, including negligence claims.
• Health insurance. Required for businesses with 50 or more full-time employees under the Affordable Care Act (ACA); optional but common at smaller headcounts.
• Business owner’s policy (BOP). Bundles property and general liability coverage, and is available to most small businesses.

Insurance premiums vary by industry, headcount, location, and coverage levels. Get quotes from multiple providers before budgeting a figure.

Professional services

Legal fees are a common hidden cost, particularly for store owners protecting intellectual property or navigating complex contracts. Small business attorney hourly rates average $349 in the US, according to Clio’s 2025 Legal Trends Report, with rates ranging from $135 to $492, depending on the location and practice area.

Patent applications are among the most expensive legal services a new business is likely to need, with attorney fees running from $5,000 to $15,000 for straightforward filings, according to The Small Business Expo. Complex inventions run higher.

How to prepare for unexpected costs

Unexpected events like a recession, a supply chain disruption, or a public health crisis can throw financial projections off course. Contingency planning and a cash reserve can reduce the impact.

“I was so scared to invest in myself, but it ultimately comes back to you," Etienne Ortega, founder of beauty brand Ortega, says in an interview with Shopify Masters. “Anything you can do to invest in yourself, whether it’s your kit, your education, or your well-being, doing good things will always come back.”

Funding options to supplement initial investment include:

Personal savings

Personal funds play an important role in startup financing. The Federal Reserve’s 2024 Startup Firms report found that startup firms were more likely than older businesses to receive funds from their owners, and 77% of startup nonemployer firms facing financial challenges used personal funds from the owner to address them.

Financial support from friends and family

Loans or grants from personal networks typically carry no interest, unlike institutional financing.

Personal loans

Banks and credit unions offer small business loans at rates that vary by credit history, loan type, and lender. Borrowers are personally liable if the loan can’t be repaid.

Merchant cash advance

Funding repaid as a percentage of sales rather than on a fixed schedule.Shopify Capital offers cash advances with automatic repayment tied to daily sales, with no fixed repayment schedule.

Allegra Shaw, cofounder of Uncle Studios, uses Shopify Capital to manage production costs without outside investors. 

“We’ve never had an investor—we didn’t have a large injection of money,” Allegra says. “But Shopify Capital has really helped us with production runs and making sure that at the end of each month, everyone’s getting paid.”

*All loans through Shopify Capital Loans are issued by WebBank. Offers are subject to change based on several factors including your store’s performance and the review of your financial information. Shopify Capital Loans must be paid in full within 18 months, and two minimum payments apply within the first two six-month periods. Offers to apply do not guarantee funding. Repayments are made based on a percentage of daily sales.

Crowdfunding

Crowdfunding platforms like Kickstarter and Indiegogo allow store owners to raise funds from backers before production. Campaigns require significant preparation and promotion time before launch.

Venture capital (VC)

VC firms invest in exchange for equity. Funding typically comes with board involvement and growth expectations. It’s most common for businesses with high-growth potential and a scalable product.

Business credit cards

Business credit cards can cover initial costs like equipment and supplies, and may offer rewards or cashback. Interest accrues on unpaid balances, so carrying a balance increases the effective cost of any purchase.

Importance of financial projections for startups

Financial projections help estimate three things before launch: how long your runway will last, what your fixed monthly commitments are, and how much revenue needs to be reinvested to reach profitability.

Around 80% of new private sector businesses survive their first year, according to BLS Business Employment Dynamics data. By year five, that figure drops to around 50%. For establishments founded in 2013, 34.7% were still operating 10 years later in 2023. Projecting costs and revenue across multiple years, not just year one, gives a clearer picture of what your operation needs to reach that business milestone.

A cash buffer covers operating costs during periods of low revenue, slow growth, or unexpected disruption.

Shopify Balance lets store owners set aside funds across up to six separate accounts within the Shopify admin, useful for separating operating cash, tax reserves, and contingency funds.

Shopify Finance brings banking, credit, and cash flow management into the same platform merchants use to run their stores. For new businesses, having financial operations connected to sales data can make it easier to understand cash flow and make faster decisions.

Tracking costs after launch is as important as projecting them before it. Monthly reviews of actual versus projected spend reveal where the budget is holding and where it isn’t—and inform decisions about reinvestment, staffing, and timing of discretionary expenses.

“Money is a learned skill, just like anything else, and you’re going to be bad at it,” Tori Dunlap, founder of Her First $100K in an interview with Shopify Masters. “It’s going to be uncomfortable and feel very vulnerable to get better at, but give yourself grace and understand that you’re learning this skill and, like anything else, it takes time.”

**Based on a 2025 survey of 500 Shopify merchants conducted in English across Australia, Canada, the United Kingdom, Ireland, New Zealand, and the United States. Respondents were established merchants with two or more years on the platform. Results reflect the experiences of this specific sample and may not be representative of all merchants.