2. Average Cost to Start a Small Business
According to data analyzed by LendingTree:
• 21% of business owners start a business for less
than $5,000
• 11.5% of business owners incur $5,000 to $9,999
in startup costs
• 16% require $10,000 to $24,999.
• However, depending on your industry and
specific business needs, startup costs may
potentially exceed $3 million, though only 0.9%
of businesses incurred such significant startup
costs.
Additionally, the U.S. Small Business
Administration estimates an average startup
cost of $3,000 for microbusinesses and
$2,000 to $5,000 for most home-based
businesses.
3. Types of Startup Costs – One-Time vs Ongoing
While some costs are a fixed one-time expenses, some costs associated with
business are ongoing.
Examples of one-time costs:
• A business plan
• Market research
• Trademarking
Examples of ongoing costs:
• Registration fees
• Licensing fees
• Facility rent
• Software subscriptions
4. Types of Startup Costs – Essential vs Optional
Examples of essential costs:
• Inventory
• Equipment
• Insurance
Examples of optional costs:
• Paid advertising (such as billboards or
magazine ads)
• Office space
• Business consultants
5. Types of Startup Costs – Fixed vs Variable
Fixed costs remain the same regardless of production. Variable costs change based
on the amount of output produced.
Examples of fixed costs:
• Utility bills
• Rent
• Insurance
Examples of variable costs:
• Ingredients/raw materials
• Shipping
• Labour/ employee costs
6. Determining Startup Expenses
List out your expected costs, which can include:
• Rent, real estate, or coworking fees
• Incorporation, licensing, permit, and registration
fees for your industry, city, state/province, and
country
• Equipment, furniture, materials, and tools you
require to begin operations
• Marketing
• Utilities and insurance
• Initial inventory
• Credit and loan repayments
• Payroll
• Estimated taxes
• To get accurate costs, get quotes from vendors and
contractors in your area.
• Make sure to also account for an emergency fund
7. Saving on Startup Costs
Save on startup costs by:
• Purchasing used equipment and tools, or
leasing new equipment
• Reducing overhead—for example,
operating in a coworking space or working
from home instead of renting dedicated
office space
• Operating your new business as a side
hustle while working in more traditional
employment, even temporarily
• Staying on top of your bookkeeping to
track your cash flow, expenses,
• and receivables
• Hiring only when your business can
support new staff
Reasonable and legitimate business expenses are tax-
deductible in Canada, including:
• Advertising and marketing
• Registration and licensing fees, permits, dues, and
taxes
• Insurance and utilities
• Professional fees
• Inventory and supplies
• Bear in mind that some purchases are considered
capital expenses. Depreciable property must be
deducted over time rather than in full in the year in
which you made the purchase.
