Business Plan Center

10 common costs of starting a business

Improve the financial section of your business plan by accounting for business costs.

Published: April 24, 2015

With so many expenses involved in getting your business up and running, it's easy to overlook some of them. As you create your business plan and make financial projections, remember to account for these 10 common costs.

1. Insurance

Business insurance is necessary to help protect you from lost revenue, lawsuits, and property damage due to situations beyond your control. Insurance expenses vary depending on your industry and size. They also depend on the kind of insurance you choose. Talk with an insurance professional about which options are best for your business, and budget for the appropriate costs.1

2. License and permit fees

License and permit fees are often industry-specific, and requirements vary by state. Permits for federally regulated industries, such as agriculture, are different from those for professionally licensed businesses, such as hair stylists and dentists.2 Visit the U.S. Small Business Administration (SBA) website to learn which licenses and permits you need and how to avoid costly penalties.

3. Taxes

As a business owner, you're responsible for payroll taxes, sales taxes, and federal and state taxes, which you must pay quarterly. Plan ahead for these taxes so you can cover them when the time comes.3

4. Equipment and supplies

Every business needs equipment and supplies, but you need to decide whether to purchase or lease them for your company. If you purchase equipment, budget for larger one-time expenses upfront. If you lease, plan for smaller payments over a longer term.4

5. Advertising and marketing

The scope of your advertising and marketing campaigns, and whether you hire a consultant, will determine how much you spend. Some business owners opt for in-house marketing to reduce expenses, but budgeting for a professional team can help you capture customer attention and improve sales. Allocate for this expense regardless of which option you choose. 

6. Distribution

Your products or services will dictate your distribution methods. Whether you distribute on your own or through a wholesaler, account for shipping, packaging, postage, and additional delivery costs in your business plan.5

7. Borrowing costs

If you finance your business by taking on loans or other debt, you'll need to budget for the cost of borrowing. This includes your loan repayments and the administrative fees that come with applying for financing.Remember that your loan repayments will also include interest and that your interest rates will depend on the term, type, size, and risk of your loan.7

8. Employee expenses

Employee expenses include payroll and benefits, such as sick leave, health insurance, and retirement plans. Federal mandates regarding employees are subject to change, so stay up-to-date on your legal requirements to avoid expensive penalties.

9. Technology

Whether it's paying to have your website built or buying new accounting software, technology costs can add up. Switching to cloud-based services instead of paying for software licenses can help you save cash, but you should still budget for these expenses.8

10. Professional services

If you plan to hire a lawyer, accountant, or other professional service provider, remember to account for his or her fees in your budget.9 These professionals often charge by the hour, so consider their hourly rates and how often you'll use their services as you create your business plan.

Forgetting to budget for certain expenses can cut into your cash flow and give you an inaccurate picture of your business's financial health. Account for all of your business costs so you can create correct and useful financial statements.


1 "Types of Business Insurance." U.S. Small Business Administration (SBA).

2 "How to Find the Right Licenses and Permit for Your New Business." SBA. (2013)

3 "Small Business Tax Obligations: Payroll Taxes." Investopedia.

4 "Business Startup Costs: It’s In the Details." Investopedia. (2015)

5 "Distribution Models." Entrepreneur. (2015)

6 "Business Startup Costs: It’s In The Details." Investopedia. (2015)

7 "General Small Business Loans: 7(a)." SBA.

8 "How to Estimate the Cost of Starting a Business from Scratch." SBA. (2015)

9 "Professional Service Providers." Entrepreneur. (2015)