How much money do I need to start a business?

One-time costs plus monthly burn times your runway, plus around 20% contingency. A service business with $28,000 of setup and $10,000 monthly burn needs about $105,600 for six months of runway, or $177,600 for twelve. The runway assumption dominates the total.

How much runway should I plan for?

Twelve months if you can. Six is a working minimum and leaves very little room for the normal pattern of slow early sales, late payments and a product that needs adjusting. Revenue almost always takes longer than projected, and runway is what buys time to respond.

What is a contingency and how much should it be?

A reserve for costs you have not anticipated — roughly 20% of the subtotal. It is not padding. Every business encounters unbudgeted expenses, and a plan with no contingency is a plan that only works if nothing unexpected happens, which has never been true of any business.

What do people most often leave out?

Working capital, their own salary, and the true cost of employees. Selling on 30-day terms means funding a month of sales permanently. Employees cost 25–40% above salary once payroll taxes and benefits are counted. Deposits, prepaid insurance and recurring professional fees are also commonly missed.

Should I use credit cards to fund a startup?

Only as a last resort. Card rates are the highest of any common source and compound quickly, which is precisely dangerous when revenue is delayed — the exact scenario the funding exists to cover. SBA-backed lending or a term loan is materially cheaper, though a new business will usually face a personal guarantee.

Startup Cost Estimator — How Much to Start a Business?

Estimate total startup capital needed. Add one-time and recurring monthly costs, set your runway, and get a recommended funding target including 20% contingency.

Startup Costs

Months of Runway:

Recommended Startup Capital

$52,920

Includes 20% contingency buffer

One-Time

$17,100

Monthly × 6

$27,000

Contingency

$8,820

Total Required

$52,920

Cost by Category

Analysis & insights

Total startup capital required: $52,920 ($44,100 base + $8,820 contingency). That breaks down to $17,100 in one-time costs (equipment, licenses, deposits) + $4,500 in monthly operating costs covered upfront. That capital should give you approximately 11.8 months of runway before needing revenue or additional capital. Runway is on the short side. Plan to start revenue or raise next round by month 6 to avoid running on fumes.

Mid-range startup capital

Bootstrappable for some, often warrants friends-and-family or SBA loan for others.

Risk & benchmark gauge

Current band

Healthy

11.8 months runway

0255075100

Too shortTightHealthyGenerous

Industry benchmarks

Recommended capital$52,920
Base capital required$44,100
Contingency reserve$8,820
One-time costs$17,100
Monthly burn$4,500
Runway11.8 months

Key insights

Almost every founder underestimates costs

Average overrun is 30-50% from initial estimate. Equipment delays, hiring earlier, legal surprises, marketing spend escalation all add up. The 20% contingency above is a floor, not a ceiling.

Bootstrap if you can

Self-funded launches avoid dilution AND force discipline. Many of the most successful businesses (Mailchimp, Basecamp, Calendly) were bootstrapped for years before any outside money.

SBA 7(a) loans = bootstrap with leverage

Up to $5M, 10-25 year terms, ~10-11% APR (2025). Personal guarantee required. Better than equity for cash-flowing businesses; worse for high-growth tech.

Recommended actions(4)

Get 12-18 months of runway before launching

High priority

Six months goes faster than you think. Revenue is always slower than expected. Cushion the timeline.

Impact: Founders who run out of money before product-market fit usually shut down even with traction.

Validate the offer BEFORE spending the build-out money

High priority

Get 10 pre-orders, 100 email signups, 3 pilot customers — anything that confirms demand before sinking $50K+ into buildout.

Funding source matters as much as amount

Medium priority

Savings (zero cost, full control). Friends/family (cheap but relationship risk). SBA loan (cheap, full control, full liability). Angel (medium cost, some dilution, advice). VC (high cost, heavy dilution, growth pressure).

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This tool is for educational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified financial professional for advice specific to your situation.

What is Startup Costs?

Startup cost estimates fail in a predictable way: people budget what it costs to open, not what it costs to survive until revenue covers expenses. Those are different numbers, and the second is usually far larger.

The distinction is between one-time costs — equipment, deposits, legal formation, initial inventory — and the monthly burn that continues from day one whether or not customers arrive. Opening a café might cost $80,000 in fit-out, and then $12,000 a month regardless of how many coffees are sold.

Undercapitalisation is consistently cited among the leading causes of small business failure, and it is rarely a failure of the business model. It is a business that would have worked given eight more months, run by someone who budgeted for four.

The formula — how to calculate Startup Costs

Total required = One-time costs + (Monthly burn × Runway months) + Contingency Contingency ≈ 20% of the subtotal

One-time costs: = equipment, deposits, formation, licences, initial inventory, build-out
Monthly burn: = rent, salaries, insurance, software, utilities, loan payments — everything recurring
Runway: = months until revenue covers the burn. Six is a minimum; twelve is safer
Contingency: = not padding — a reserve for the costs you have not thought of, which always exist

Runway is the variable people compress when the total looks frightening. It is also the one that determines survival, which makes cutting it precisely the wrong economy.

Step-by-step example

01A small service business.
02One-time: equipment $15,000, legal and formation $2,500, initial marketing $5,000, deposits $4,000, software setup $1,500 = $28,000.
03Monthly burn: rent $2,200, salaries $6,000, insurance $400, software $350, utilities $250, marketing $800 = $10,000.
04At six months of runway: $28,000 + ($10,000 × 6) = $88,000.
05Contingency at 20%: $88,000 × 0.20 = $17,600.
06Total required: $105,600.
07Now extend runway to twelve months: $28,000 + $120,000 = $148,000, plus $29,600 contingency = $177,600.
08That $72,000 difference is the entire question. It is not a bigger business — it is the same business with twice the time to find its footing, and it is what separates a temporary bad quarter from insolvency.

Why runway matters more than the launch budget

A business does not fail because it spent too much on equipment. It fails because it ran out of cash before revenue caught up, and revenue almost always takes longer than projected.

The pattern is consistent: sales cycles are longer than expected, early customers pay late, word of mouth builds slowly, and the first version of the offering needs changing. None of these are failures of execution — they are the normal shape of starting something.

Runway buys the time to survive that learning. A business with twelve months can absorb a slow first quarter and adjust. The same business with four months must be right immediately, and almost nobody is.

This is why cutting runway to make a plan look affordable is self-defeating. You have not reduced the capital the business needs; you have only reduced the capital you have.

Founders systematically underestimate the timeline

Plan for revenue to take roughly twice as long and cost roughly 50% more than your first estimate. This is not pessimism, it is the observed pattern, and it is why the contingency line exists as a discipline rather than a rounding allowance. A plan that only works if everything goes right is not a plan.

The costs people forget

Working capital —: inventory and receivables tie up cash before customers pay. A business selling on 30-day terms funds a month of sales out of its own pocket, permanently.
Your own salary —: if the business must support you, that is a business cost. Leaving it out produces a plan that only works if you have another income.
Payroll taxes and benefits —: an employee costs 25–40% above their salary once employer payroll taxes, insurance and paid leave are counted.
Deposits and prepayments —: commercial leases commonly require several months up front, and utilities and insurers often want annual payment.
Professional fees —: accounting, legal review and permits recur rather than happening once.
Equipment replacement —: anything with moving parts or software has a replacement cycle shorter than you expect.
Taxes on profit —: quarterly estimated payments begin as soon as the business is profitable, before you have a full year of cash flow behind you.

Funding, and what each source really costs

How you fund the gap changes the risk profile more than the total. The cheapest capital by interest rate is frequently the most expensive by consequence.

Personal savings carry no interest and no dilution, but the downside is concentrated entirely on you. Business loans and SBA-backed lending offer better rates than most alternatives, and almost always require a personal guarantee for a new business — which means the corporate structure does not shield you from the debt.

Equity investment removes repayment pressure and permanently gives away a share of everything that follows. Credit cards are the most expensive option at typical card rates and the easiest to reach for, which is a dangerous combination when revenue is late.

The most useful discipline is to fund the full requirement including contingency before opening rather than planning to raise more later. Raising capital while running out of it is the weakest possible negotiating position, and terms reflect that.

Funding sources compared

Source	Cost	Main risk
Personal savings	No interest	Concentrated personal downside
SBA-backed loan	Moderate rate	Personal guarantee typically required
Bank term loan	Moderate to high	Harder to obtain pre-revenue
Equity investment	Permanent share of profits	Loss of control and dilution
Credit cards	Highest	Compounds fast if revenue is delayed
Friends and family	Varies	Relationship risk exceeds financial risk

Key considerations

Budget the runway, not just the opening costs — that is what determines survival.
Twelve months of runway is a far safer target than six.
Include your own salary if the business must support you.
Employees cost 25–40% above salary once payroll taxes and benefits are counted.
Working capital ties up cash permanently if you sell on terms.
Fund the full requirement including contingency before opening.
Track actual against projected monthly — a widening gap is the earliest warning signal.

Common mistakes to avoid

Budgeting to open rather than to survive until revenue covers costs.
Cutting runway to make the total look affordable.
Omitting the founder's salary and building a plan that needs a second income.
Forgetting deposits, prepaid insurance and professional fees.
Underestimating how long revenue takes to arrive — plan for roughly double.
Planning to raise more capital later, which happens from a position of weakness.
Using credit cards for the gap and compounding the problem when revenue is late.

Frequently asked questions

Sources & references

Written and fact-checked by the CalcProLabs Editorial Team. Read our calculation methodology and editorial policy.

Last updated July 28, 2026