Step 3 – Fund Your Business

It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business.

Business Categories

The first step is to determine how much funding you will need.  Most businesses fall into one of three categories: brick-and-mortar businesses, online businesses, and service providers. You’ll face different startup expenses depending on your business type.

Typical Startup Costs

There are common startup costs you’re likely to have no matter what. Look through this list, and make sure to add any other expenses that are unique to your business.

  • Advertising and marketing
  • Communications
  • Employee salaries
  • Equipment and supplies
  • Insurance
  • Inventory
  • Lawyer and accountant
  • Licenses and permits
  • Making a website
  • Market research
  • Office space
  • Printed marketing materials
  • Utilities

Estimate Costs

Once you have your list of expenses, you can estimate how much they’ll actually cost. This process will be different for each expense you have.

Some expenses will have well-defined costs; permits and licenses tend to have clear, published costs. You might have to estimate other costs that are less certain, like employee salaries. Look online and talk directly to mentors, vendors, and service providers to see what similar companies pay for expenses.

One-time Expenses & Monthly Expenses

Once you’ve identified your business expenses and how much they’ll cost, you should organize your expenses into one-time expenses and monthly expenses. Add up your one-time and monthly expenses to get a good picture of how much capital you’ll need and when you’ll need it.

One-time Expenses 

One-time expenses are the initial costs needed to start the business. Buying major equipment, hiring a logo designer, and paying for permits, licenses, and fees are generally considered to be one-time expenses. You can typically deduct one-time expenses for tax purposes, which can save you money on the amount of taxes you’ll owe. Make sure to keep track of your expenses and talk to your accountant when it’s time to file your taxes.

Monthly Expenses

Monthly expenses typically include things like salaries, rent, and utility bills. You’ll want to count at least one year of monthly expenses but counting five years is ideal.


Calculate your startup costs by using this fillable spreadsheet (PDF).

Types of Start-Up Funding

  1. Self-Funding
  2. Venture Capital from Investors
  3. Crowdfunding
  4. Small Business Loan
  5. SBA-Guaranteed Loans
  6. Small Business Investment Company
  7. Small Business Innovation Research
  8. Small Business Technology Transfer


Self-funding lets you leverage your own financial resources to support your business. Self-funding can come in the form of turning to family and friends for capital, using your savings accounts, or even tapping into your 401k.
With self-funding, you retain complete control over the business, but you also take on all the risk yourself. Be careful not to spend more than you can afford and be especially careful if you choose to use tap into retirement accounts early. You might face expensive fees or penalties or damage your ability to retire on time — so you should check with your plan’s administrator and a personal financial advisor first.