Knowing the costs of starting a business

Key points

• Start-up costs are the expenses you’ll need to cover when opening a business
• Some costs are universal, others are specific to certain industries and business types
• Knowing your start-up costs will help you set up for success

Starting a business in Australia comes with a range of upfront costs that can vary depending on the type of business you’re opening. Use this guide to help you predict and plan for your start-up costs early on – setting you up for success later.

Business startup costs refer to the initial expenses required to establish a new business. These costs can be grouped into two main categories: pre-opening expenses and ongoing operating expenses.

Costs to expect when starting a business

The costs associated with starting a business will vary depending on several factors, such as whether you're starting a business from scratch, taking over an existing business, investing in a franchise, your location and specific requirements.

Common business start-up costs to plan for:

• physical assets
• business registration costs and licencing
• legal expenses
• business finance expenses
• business insurance costs
• financial and accounting advice
• sales and marketing.

Running costs: planning for operating expenses

Once you’ve officially started your business, you’ll have day-to-day expenses to cover. Although these aren’t considered ‘start-up costs’, it’s usually recommended that you have enough money tucked away to pay these for at least six months prior to opening.

Common running costs include:

• mortgage or rent
• utilities
• income (for you and staff)
• purchasing/manufacturing stock
• insurance
• software costs
• ongoing marketing and advertising
• professional development*
• maintaining professional licences or registrations.*

*Only applicable in certain industries.

Learn more about how to set up your finances so you can better manage your expenses.

Capital costs: planning for the purchase of assets

Your business will likely purchase or create several assets. Assets are anything of value owned by the business and used as part of its operations. Examples of assets include:

• office furniture
• equipment (including computers)
• cars or other vehicles
• intellectual property.

Operating costs are incurred to cover recurring expenses that are consumed by the business in a short amount of time. However, the business derives ‘value’ from the use of the assets over a long period of time, so this type of cost is spread over the period of expected usage for accounting and tax purposes.

Streamline your start-up: try our business set-up costs calculator

Calculating your start-up costs ahead of time will help you avoid any surprise expenses and set you up nicely to manage your business from the start.

To simplify this process, ANZ has created a set-up costs calculator that you can use to estimate how much money you’ll need.

To use the calculator:

• Download the set-up costs calculator spreadsheet.
• Select either the ‘Capital Costs’ or the ‘Monthly Costs’ sheet.
• Fill in each individual cost – the calculator includes a list of core expenses.

Once you’ve calculated your start-up and monthly expenses, you’ll be able to use the revenue calculator, also included in the spreadsheet, to estimate how much your business might bring in over the course of a year.

Remember to be realistic and add a buffer

When estimating your start-up costs, it’s crucial that you’re realistic and thorough.

Conduct extensive research and list every possible expense likely to affect businesses in your industry. It’s helpful to include some emergency funds in these costs, too, just in case.

If you’re still uncertain about the expenses you’re likely to face, you should consider speaking with an accountant for expert advice.

It's also helpful to add 10% onto your estimated start-up costs as a small buffer to help manage any unforeseen expenses. This buffer, and a pool of emergency funds, should help cushion the blow from any nasty surprises.

Where to next?

• The more you know about potential business set-up costs, the better off you’ll be. Use our set-up costs calculator (xlsx) as your starting point.
• Want more tips on how to turn your idea for a business into reality? Explore our articles on starting a business.