Starting a business in the U.S. costs $735, which is relatively affordable at just 16 percent of the average monthly paycheck.Credit: Jason Kempin/Getty Images for iHeart Media
Starting your own business should be cheap, right? Because if you’re successful, you create jobs, wealth, and tax revenue. Everybody wins. And yet, becoming an entrepreneur is not cheap — at least not everywhere.
As a budding businessperson anywhere, you must jump through a series of administrative hoops by acquiring the proper approvals, permits, and licenses. Those cost money as well as time.
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So, how much cash do you have to fork out before you can start forking it in? Based on World Bank data, BusinessFinancing.co.uk produced a map for that. And it shows some pretty stark differences between countries. But first, some context:
The greener, the better; orange is expensive. Italy, Austria, Netherlands and Belgium are expensive places to start businesses.Credit: BusinessFinancing.co.uk, reproduced with kind permission.
Europe is a pretty diverse place when it comes to the cost of setting up a business. On the low end of the scale, twelve countries have fees of less than $100. On the high end, eleven countries require more than $1, 000.
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The Bahamas and Mexico are the most expensive places in North America to set up a business. Credit: BusinessFinancing.co.uk, reproduced with kind permission.
The U.S. ($725) is in North America’s Goldilocks zone: only half as expensive as Mexico ($1, 463.81) but more than four times as dear as Canada ($166.19).
Setting up a business is very expensive in Suriname, Ecuador, Bolivia, and Uruguay but relatively affordable elsewhere. It’s even super cheap in Venezuela and Chile.
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Africa’s low wages are a double-edged sword. They are a boon to companies in search of manual labor but a barrier to local entrepreneurs looking to invest in a company of their own. In many places, those barriers remain firmly in place, but others have realized the benefit of encouraging start-ups.
In Pakistan, you can get your own company for just under $20. That’s a fraction of the cost in Syria, nearly $1, 400. Credit: BusinessFinancing.co.uk, reproduced with kind permission.
This is not one region, but two: the very expensive countries are in the Middle East, and the very cheap ones are in Central Asia.
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With not a single four-figure fee in sight, and relative cost low as well, setting up business in this part of the world is both cheap and affordable.
For centuries, the only way to travel between the Old and New World was through ships like the RMS Lusitania. Experiences varied wildly depending on your income.
The Knights Templar were not only skilled fighters, but also clever bankers who played a crucial role in the development of Europe’s financial systems.Start your free trial, then enjoy 3 months of for $1/month when you sign up for a monthly Basic or Starter plan.
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Many entrepreneurs starta business with little more than a dream and a shoestring budget. In fact, some business models require very little up-front costs, and at , we’ve personally witnessed the success of countless entrepreneurs with humble beginnings. But among the small businesses that get their business off the ground and don't last, more than a third cite a shortage of cash as the reason.
? And do aspiring entrepreneurs have any misconceptions about what those costs will look like in their first year of business? In October, we surveyed 150 aspiring entrepreneurs and 300 small business owners in the US to find out exactly that.
We also asked our respondents to take it one step further—we had them look back at their first-year records and tell us how much money they allocated to various business expenses as a percentage of their total budget. To keep it simple, we bucketed the following functions and cost categories:
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It’s important to note that the amount businesses spent in their first year varied significantly, depending on factors like industry and business model; whether the business was a full-time, part-time, or hobby venture; and whether the business had additional employees. But more on that later.
While new entrepreneurs often rely on their personal savings to keep their business afloat in the early days, one-third of respondents reported reinvesting revenue from their business sales to cover their business costs in the first year.
Accepting that your first year of business may not be very profitable is important for both financial planning and mental preparation. Many founders are the last to be paid in their first year, as all of the company’s revenue goes back into the business. That’s perfectly normal.
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For companies struggling to make sales in their first year, creating a comprehensive financial plan with how much you’re going to need and how you’re going to use it will make it easier when you’re applying for a small business loan or trying to attract investors.
Don’t think of this as taking on debt: startup expenses are necessary to generate revenue, so the return on your investment will likely be greater than the upfront costs.
Perhaps unsurprisingly, having employees dramatically increases overall spend. If you choose to go the solo business ownership route, you can spend less than one-third what businesses with employees spend.
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Beyond fixed costs, business owners also noted common one-time costs that sprung up in their first year and warned of hidden expenses to look out for.
Recurring expenses and fixed costs are only part of your financial plan: hidden costs, one-time costs, and variable costs also need to be considered in advance. What happens if an unexpected event (e.g., a pandemic, a recession, or both) throws off your projections? It’s always a good idea to do some contingency planning and set aside a cash reserve, just in case.
When we asked our aspiring entrepreneurs how much they thought their first year of business would cost them, they wholly overestimated in one area: they expected online costs to be more expensive than established business owners reported.
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Entrepreneurs who expect to spend more to start a business may end up paying more than they have to. The rationale is simple: if entrepreneurs expect to spend more on a service, what they’re willing to pay for said service goes up accordingly.
The perceived cost and complexity of launching and scaling an online business remains a barrier to entry for many aspiring entrepreneurs. But it’s largely unfounded. For ’s part, our core ethos is to enable precisely those entrepreneurs who don’t have coding or design skills to create an online store. And to do so affordably.
Our research corroborates this: of the 300 business owners we surveyed, we found that customers spent an average of $38, 000 in their first year, compared to non- customers who spent an average of $41, 000 in their first year.
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Just because a business owner managed their budget a certain way in the first year doesn’t mean it was the right way. Indeed, most of our respondents admitted that, in hindsight, they would have spent their money differently in their first year.
To provide better guidelines for aspiring entrepreneurs, we decided to look more closely at the data of businesses who reported higher earnings in their first year to see which decisions may have contributed to their financial success. Here’s what we found.
The relationship between revenue and team costs may seem like an obvious one: if you make more money, you can afford to pay yourself and hire employees. But the relationship goes both ways: adding members to your team can also drive revenue growth.
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And while going it alone is good business sense at the beginning, it’s worth noting that there’s a ceiling with this approach. When you’re a solopreneur, you have limited resources: they start and end with you. You’re limited to the skills you possess and the skills you’re willing to learn.
Many business owners reach a milestone in their career where they need to weigh the financial costs of hiring help with the time costs of doing everything by themselves.
It’s important that entrepreneurs know what red flags to look out for that indicate it’s time to hire help. Some red flags include turning down work because you can’t keep up, seeing the quality of your product or service suffering, or seeing the quality of your sleep or mental health suffering.
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When we asked business owners, “How much did marketing account for as a percentage of your overall budget?” we found a significant relationship between marketing spend and revenue.
The less money a business made overall, the more it spent on marketing. And the inverse was true too: the more money a business made overall, the less it spent on marketing.
If you’re overspending on marketing without a clear return on investment, it could be an early sign of bigger problems, such as a website that doesn’t convert—or worse yet, a weak product-market fit. It’s imperative that business owners obsessively track, report, and revisit their marketing efforts on a regular basis.
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Still, marketing is more of an art than a science, and getting the budget exactly right at the beginning is tough. Spend too little, and you won’t get your brand in front of buyers; spend too much, and you’re less likely to hit
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