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How Much To Start Own Business
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When starting a business, it’s helpful to have an idea of what start-up costs to expect, whether you’re familiar with the industry or a newcomer.
Using data from the Census Bureau, the researchers estimated the average start-up costs for businesses in a wide range of industries. Most business owners (21%) start their venture with less than $5,000. But startup costs can exceed $3 million, depending on the industry and other startup factors.
Our findings include the average and median costs to start a business. Because the average takes into account businesses with costs in the millions, it is often skewed upward. The average cost reflects the midpoint – 50% of businesses cost less and 50% of businesses cost more – and is usually lower than the average.
Managing companies and enterprises is the most expensive industry you can start in. Examples of companies in the space include those that either hold securities or equity interests in another enterprise, or oversee and manage planning and decision-making within another business. According to our estimates, the average business in this industry requires about $440,740 in seed funding, while the average needed $191,762.
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Municipal services take the second place. Not many firms reported data – there were only 1,097 service companies in the Census Bureau data set. Combined, they used $284 million in funding, which is $265,676 per firm. But the average utility firm needed $88,333 to get started.
Food and lodging firms had the third highest average start-up costs. This industry includes mom-and-pop diners, as well as casinos and hotels, which increase the average. In this industry, the average new firm costs over a quarter of a million dollars to start. Roughly two-thirds of businesses in this sector required more than $50,000 in seed funding, while the average firm needed $93,621.
Construction is the least expensive industry to enter. The average new firm needs just $67,349 to get started, while 50% of firms started with less than $12,390. This was also one of the largest industries in the survey with nearly 300,000 reporting firms.
Average costs are also low for administrative and support services and for waste management and remediation. Employment agencies, cleaning services, waste collection and travel agencies are all examples of firms that fall into this category. To start a business here, the average entrepreneur needs $69,509. Many start with less, as the average firm in this industry opened with $12,549 in capital.
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If it still seems expensive to start your own business in any of these industries, there are still options if you can only afford a business loan of up to $10,000. In construction, nearly 47% of firms reported using less than $10,000 in start-up financing. It can be even less to start an administrative and support, waste management or repair business: nearly 31% of these firms started with less than $5,000.
However, $10,000 probably wouldn’t be enough to get you into the restaurant scene. Less than 10% of lodging and food service businesses started with less than $10,000. Also, less than a quarter of health care and social assistance firms started with less than $10,000 in funding.
Among the 4,651 firms that reported costs, the average amount of capital needed to start a business in this industry is $440,740. The total amount spent on startups for all reporting firms exceeded $2.05 billion.
Industry workers in this sector include accountants, bookkeepers, financial managers, office managers and general managers. They may handle financial planning or other administrative tasks for companies that prefer a third party versus in-house management.
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Startup expenses may include office space, either purchased or leased, bookkeeping or accounting software, liability insurance, marketing, business licenses, and various office supplies. You may be able to start a management business for less than average. The average startup cost is $191,762, although it is the highest average price in our study.
On average, it costs $265,676 to start a service business, giving the industry a No. 2 in our study. However, industry had the lowest response rate with 1,069 companies reporting costs. The amount all reporting utilities spent to get started totaled more than $284 million.
Electricity, natural gas, steam supply, water supply and sewage disposal businesses are categorized in the service industry. These businesses rely on experts and skilled workers, as well as expensive machinery. Business owners may also need to purchase land to gain access to resources such as oil and natural gas. Even with the low number of respondents, the service industry had the third highest average start-up cost in our study at $88,333.
Industry #3 falls just below utilities with an average initial cost of $252,713. The number of respondents totaled 221,867 firms, and these businesses used a combined total of more than $56 billion in seed capital.
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As mentioned earlier, this sector includes high-end hotels and restaurants and smaller businesses such as fast food restaurants. Upscale establishments skew the average cost, but the average cost to start a business in the lodging and food service industry is still the second highest at $93,621.
Location itself is usually the main cost driver in this industry. In addition to interior and exterior space, finishes, and fixtures, restaurant owners also spend money on marketing, inventory, and staff. Additional costs for hoteliers may include recreational facilities and food and beverage options.
These industries have the lowest average start-up costs as well as average costs near the bottom of our list.
The construction industry has the lowest average start-up costs in our study at $67,349. And although 300,176 firms reported costs, their combined start-up costs totaled only $20.2 billion. The average cost is $12,390, which is our second-to-last.
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Start-up costs for construction businesses can include raw materials needed for projects, tools and equipment, labor, insurance, permits and licenses. Costs can be somewhat controlled, as the size of the project and the needs of the company would affect the overall costs.
Starting a business in this industry is slightly more expensive than starting in construction. The average amount of money needed to start a company is $69,509. Total start-up costs for the 157,657 respondents totaled $10.9 billion. The average amount of equity needed was among the lowest at $12,549.
Landscaping, landscaping, insurance and conservation services in this category. These businesses tend to have minimal startup requirements. The initial costs for a cleaning service, for example, usually only include supplies and labor costs.
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The average amount to start a professional, scientific and technical services firm is $72,046. The median figure is the lowest in our study, at $9,952. For the 402,654 companies that responded, start-up costs totaled $29 billion.
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This sector usually includes accountants, auditors, architects, lawyers and analysts. Office space is likely to be the largest upfront expense. Lawyers, for example, should expect to invest most of their startup money on office furniture and equipment, as well as professional licenses and insurance. Equipment such as a computer, printer, telephone, document scanner and software can also be added.
To estimate average start-up costs, the researchers used survey data from the US Census Bureau. The researchers found the total amount of capital used to start or buy a business and divided that amount by the total number of firms that reported financial estimates. These financial estimates are given in intervals. To make our estimates, we assumed that businesses used the average of the range to finance their business.
For example, 295,500 firms reported using between $5,000 and $9,999 to start their business. To estimate the total amount of capital employed, we assumed that the average firm in that range used $7,500, which is halfway between $5,000 and $9,999. Companies that reported costs of $3 million or more were not included in the analysis because without a fixed range, we cannot make estimates.
To estimate average start-up costs, we used distributions provided by the Census. We determined the startup cost ranges where the average would fall: less than $5,000, $5,000 to $9,999, $10,000 to $24,999, $25,000 to $49,999, $50,000 to $99,999, $100,000 to $249, 999, $250,000 to $999, 999, $1 million to $2.9 million and $3 million or more. Assuming that all firms were equally distributed across the range, we then found what
Outputs: Goods And Services
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