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Business & Tax
Complete breakdown of startup costs by industry including equipment, licenses, inventory, and working capital.
By FreeCalculators Editorial · Published 2026-09-01 · Updated 2026-09-04 · 5 min read · 1,030 words
Most US small businesses open on somewhere between $2,000 and $150,000, and the spread is driven almost entirely by whether the business needs a lease, inventory, or licensed equipment. A home-based service business can start for under $5,000; a full-service restaurant rarely opens under $200,000. The number that matters is not the industry average but your own line-item total plus the cash needed to operate until revenue covers costs.
Startup spending splits into three buckets: one-time capital outlays (buildout, equipment, deposits), one-time soft costs (formation, licensing, branding, first insurance premium), and pre-revenue operating costs (rent, payroll, software, marketing) that run until sales cover them. The third bucket is the one founders leave out, and it is usually the largest of the three.
Price each bucket separately, then multiply the third by the number of months you expect to operate below break-even. Twelve months is a realistic default for a consumer business; eighteen is common for anything with a sales cycle or a permitting delay.
| Business type | One-time outlay | Monthly pre-revenue burn | Cash to open, 12 months |
|---|---|---|---|
| Home-based service or consulting | $2,000 - $10,000 | $400 - $1,500 | $7,000 - $28,000 |
| Online store, light inventory | $8,000 - $35,000 | $1,500 - $5,000 | $26,000 - $95,000 |
| Trades contractor with a vehicle | $25,000 - $80,000 | $3,000 - $8,000 | $61,000 - $176,000 |
| Retail storefront | $50,000 - $150,000 | $8,000 - $20,000 | $146,000 - $390,000 |
| Full-service restaurant | $200,000 - $500,000 | $25,000 - $60,000 | $500,000 - $1,220,000 |
Costs incurred before the business opens are not ordinary deductible expenses. Under Internal Revenue Code section 195 the IRS allows an election to deduct up to $5,000 of startup costs in the year the business begins, with a separate $5,000 election for organizational costs under section 248. That $5,000 is reduced dollar for dollar once total startup costs pass $50,000, and the remainder is amortized over 180 months.
The cash-planning consequence is blunt: a founder who spends $60,000 before opening gets no immediate deduction at all and instead amortizes roughly $333 a month for fifteen years. Equipment follows the depreciation rules instead, so keep those invoices in a separate pile from day one.
Cash needed to open a two-chair salon (2026)
One-time outlay Leasehold buildout ................ $28,000 Equipment and two chairs ......... $12,000 Security deposit, 2 months ....... $ 6,400 Formation, licence, signage ...... $ 3,600 Opening inventory ................ $ 4,000 Subtotal ......................... $54,000 Monthly pre-revenue burn Rent $3,200 + payroll $4,800 ..... $ 8,000 Insurance, software, utilities ... $ 1,100 Marketing ........................ $ 1,400 Subtotal ......................... $10,500 Months planned below break-even .... 9 Operating reserve = 9 x $10,500 .... $94,500 Contingency, 20% of $54,000 ........ $10,800 Total cash to open ................. $159,300
Bureau of Labor Statistics Business Employment Dynamics data has shown for decades that roughly one in five new establishments closes within its first year and about half are gone by year five. Very few of those closures follow a bad idea discovered in month two. They follow cash running out before demand matured, which is a budgeting failure rather than a market one.
Comprehensive Guide
Read our business and tax guide for margins, payroll, and tax planning.
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How this guide was created
This guide was written and reviewed by FreeCalculators Editorial, drawing on published formulas, official government sources, and real calculator outputs from our 4 calculators in this category. Every claim is sourced; every formula is auditable. Read our review policy.