How to Manage the Startup Costs for a New Business

How to Manage the Startup Costs for a New Business

Setting up a business requires effective strategies and organization. A majority of the entrepreneurs have an early-development plan to keep startup costs in check by adhering to monthly or annual budgets.

As an entrepreneur, this is a mission-critical aspect of your organization’s success. While planning your organizational costs, you need to make a few realistic assumptions about your startup.

You can initiate the process by posing yourself with the following questions:

  • How much is your product going to cost you?
  • How many customers does your startup aim to get on board?
  • How much revenue will your startup generate in the first year?

By employing these benchmarks, you can understand the status of your cash flow and plan accordingly.

Here’s a compilation of the major startup costs which will assist you in designing a detailed budgeting plan.

List of major startup costs for your new business 

#1 Equipment

Equipment costs can be a major startup expense, depending on the nature of your business. To reduce the upfront cost of equipment, there are several lease opportunities available.

Additionally, while starting a business, you can opt to use refurbished equipment via online auctions or resale stores, to reduce organizational costs.

#2 Human Resources

The major expenses under this category include employee training, benefits, payroll, and recruitment. All these aspects combined can amount to a huge sum in the monthly budget for your startup.

A quarter of your budget has to be allocated to your human resources function. This includes ensuring the inflow of talent, keeping the employee morale up, issuing business credit cards, employee training, and ensuring the smooth functioning of the organization.

As the head of your startup, you can take the final judgment on who to hire, however, you need to outsource the recruitment process to an agency to reduce your operational expenses.

#3 Legal Fees

Legal fees are often overlooked while entrepreneurs are setting up a business. Legal fees amount to a significant chunk of your startup costs, and you should pay heed to this critical aspect while framing up a budget plan for your organization.

Some of the early-stage legal fees to be considered include the following:

  • Retainer fees
  • Statutory fees
  • Referral fees
  • Contingency fees
  • Attorney fees
  • Incorporation fees

Paying a lawyer can never be avoided, however, there are certain hacks which might help you in your business journey:

1. Outsourced general counsel

Numerous law firms flexibly offer their services. In such an arrangement, the lawyer assigned to your firm operates on an as-needed basis and part-time. This will help you save on your business expenses.

2. Alternative fee arrangements

A majority of the lawyers charge their services by the hour but it is always worth enquiring if they have an alternative arrangement.

3. Minimum viable legal protection

Many a time, instead of heading towards a law firm, you can opt to do a few major tasks by yourself. This includes filling up standard forms and regular legal procedures, among others.

#4 Marketing

The advertising and marketing budget is another critical part of your startup costs. You need to prepare a monetary plan for social media, business credit cards, creation of blogs, and advertisement.

To optimize brand recognition, you need to invest time, money, and energy in strong marketing campaigns.

You need to make use of social media platforms like Facebook, YouTube, Instagram, and Twitter to advertise your content.

#5 Office Space

You need to allocate a portion of your budget towards gaining access to a decent office space. This can be a tedious task, especially due to tight budgets.

There are alternatives such as co-working spaces to help you save on your business expenses. You can also learn how other budding startups are functioning and going on about their business.


It is natural for startup costs to be high. It may seem overwhelming at the start, but as you proceed with planning, you will find great ways to establish a sustainable business while keeping the expenses in check.

Multiple funding options such as crowdfunding, angel investors, venture capital funds are available to help you kickstart your business. Although bootstrapping your startup may seem like an ideal option, there is no harm in sourcing funds for your startup.

Remember, planning in advance while keeping the above major startup costs in mind will always give you an upper hand.


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