This Is the Average Cost of Starting a Small Business in 2022

Hint: It's a five-digit number.

Money. You gotta spend it to make it. Business owners understand this better than most people. Whether it's becoming an online reseller or starting a small brick-and-mortar business, it takes time and money to set up shop.

Starting a business isn't cheap. According to one survey by business.org, half of business owners underestimate how much it costs to make money in their first year.

The cost of starting a small business depends on where small business owners open shop: online, in real life, or on mobile.

Online stores

Online stores are the cheapest to operate. It costs a small business owner an average of $35,000 to run an online-only business their first year, according to business.org. That number includes inventory, paying employees, marketing, shipping, and everything that goes into running a small business.

Here are some of the most unexpected costs online businesses face in their first year, according to one Shopify study:

• Shipping costs
• Legal fees
• Inventory costs

The same study found that employees are also expensive. Business owners with zero employees spent $18,000 in their first year, and owners with one to four employees spent $60,000. Running a one-person business can create big savings.

Your launch platform can also make or break your business. Shop around for the best e-commerce software to find the perfect match for your needs. 

Physical storefronts

Physical storefronts require a higher upfront cost to get moving. Storefront business owners spent an average of $100,000 in their first year of business. One reason for the price spike is that physical and mobile store owners often also operate online.

Storefront owners must account for the cost to rent, renovate, and maintain their store(s). On average, business owners surveyed spent about 15% of their first-year costs on location fees and another 7% on utilities. That adds up to $22,000 out of a $100,000 yearly budget.

For a deeper dive into what it takes to open a physical store, check out how much it costs to open a restaurant. 

Mobile

Mobile stores were also surprisingly expensive to jumpstart compared to online stores. Mobile business owners spent an average of $95,000 in their first year of business. Mobile and online stores spend an outsized portion of their expenses on inventory.

One of the biggest surprises small business owners can face is the cost of tax season. The best accounting software for small businesses keeps costs and time spent on accounting to a minimum.

Should I start a small business?

That depends. Are you prepared to pay the upfront costs of getting your business running? If so, you're in a good place. You'll want to keep costs low and profits high. If you're looking to borrow, you'll want to look into the best personal loans to fund your business.

Here are some of the ways small business owners can control expenses:

• Save up more than needed. Prepare to overspend.
• Review the basics of accounting. It's not sexy, but it's important.
• Open a business checking account to pay operating expenses.

Do you want to start your own business? Check out what it actually takes to start an online business this year. It's easier than ever to whip up an online store and start selling -- thanks to seller platforms like eBay and ThredUp, you can get started in as little as five minutes.

It's a big world, and with the right idea and some startup funding, you can start your own small business in 2023. Consider your options and remember your goals. You've got this!