Startup Cost Calculator

How to use the startup cost calculator

1. One-off costs to open: fill in what you pay once before or at launch, such as registration and legal work, equipment, your website and branding, opening stock and launch marketing. Enter 0 for any line that does not apply.
2. Costs you pay every month: fill in rent and utilities, software, marketing, insurance and professional fees, and pay. Include your own pay if you need the business to support you.
3. Months of running costs to cover: choose how many months you want to be able to pay those bills before sales take over.
4. Contingency buffer: choose a percentage to add on top for surprises.

The total updates as you type. The example values describe a small product business and are only there so the result is not empty. Replace every one with your own figure.

The startup cost formula

This is the usual way to budget a new business: separate what you pay once from what you pay again and again, decide how long you must fund the second group, and add a margin for error. The monthly group is your gross burn rate, and the months you cover are the runway, meaning the time before the cash runs out, that you are buying on day one.

The calculator applies the contingency to everything, both one-off and monthly costs. It also shows what share of your costs before the buffer is one-off, so you can see whether the money goes mostly into opening or mostly into staying open.

A worked example

Say you plan a small product business. Your one-off costs are $500 for registration and legal, $3,000 for equipment, $1,200 for a website and branding, $2,000 for opening stock, $800 for launch marketing and $500 for other items. Each month you expect $800 for rent and utilities, $150 for software, $450 for marketing, $200 for insurance and professional fees, $1,200 in pay and $200 in other costs. You want to cover 6 months and add a 10% buffer.

Notice that the one-off costs are less than a third of the costs before the buffer. Most of the money pays for six months of staying open. If you cover 3 months instead of 6, the total falls to $18,700, but you have half the time to find paying customers.

How to read the total and bring it down

The total is how much money you should have available, from savings, a loan or investors, before you commit. It is not the amount you must spend on day one. If the number is more than you have, you have three honest options: lower the costs, raise the money, or start smaller.

• Test the idea before you pay for the business. Most one-off costs can wait until you know people will buy. Talk to customers and take pre-orders first. See how to validate a startup idea.
• Rent, borrow or buy used. Equipment is often the largest one-off line and the easiest to shrink.
• Launch a smaller first version. A narrower product needs less stock, less build time and less marketing. Read how to build an MVP.
• Keep your income for longer. If you start on the side, you can set pay to 0 for now, which often removes the largest monthly line.
• Bring revenue forward. Deposits and pre-orders reduce how many months you have to fund yourself.

Once you have a total, check two things. First, how many sales it takes to cover the monthly costs, with the break-even calculator. Second, how you will pay for it. Funding the business from your own savings and early sales is called bootstrapping, and it is how many first-time founders begin.

A startup budget is also a core part of any business plan, and lenders and investors will ask how you reached each figure. Fonda's business plan has 10 chapters, with sources and an appendix, and you can read example plans there without an account.

What the calculator leaves out

• Revenue. The model assumes you earn nothing during the months you cover. That is a cautious starting point. If you expect early sales, you may need less, but do not count on money you have not been paid.
• Costs that change over time. Monthly costs are held flat. In practice they tend to grow as you hire, advertise and sell more.
• Taxes, licenses and legal fees for your location. These differ by country, state and city, and by industry. Check with your local business registration office or an accountant, and put the real figures in the registration and legal line.
• Loan interest and repayments. If you borrow the money, add the monthly payment under other monthly costs.
• Your personal living costs. Unless you enter your own pay, the total covers the business only. The quit your job calculator looks at the personal side.

The categories are general on purpose. A food truck, a software product and a consulting practice have very different cost lists, so use the other lines for anything that does not fit, and get quotes for the big items.