How to Calculate Your Startup Costs

A Practical Guide for New Business Owners in Greater Cincinnati & Northern Kentucky. 

Calculating your startup costs isn’t just a budgeting exercise; it’s the foundation of your business’s financial health. Whether you’re opening a small bakery in Covington, launching a home-cleaning service in West Chester, or starting a freelance design studio in Florence, knowing your upfront and ongoing costs helps you: 

- Price your products or services correctly 
- Understand how much funding you actually need
- Approach lenders or investors with confidence 
- Reduce surprises in the first year of operations 

Understanding Startup Costs

 Startup costs fall into two categories: 

1. One-Time Startup Costs 
Consider what you’ll need to spend to get your business off the ground.

- Business registration and licenses 
- Equipment and machinery 
- Technology (laptop, POS equipment) 
- Renovations or buildouts 
- Initial marketing and branding 
- Inventory purchases 
- Professional fees (legal, accounting) 

2. Ongoing Monthly Costs
Consider what it will cost to keep your business running once you open your doors.

- Rent or lease 
- Utilities 
- Payroll or contractor payments 
- Software subscriptions 
- Marketing/advertising 
- Insurance 
- Inventory replenishment 

Example: A new food truck operating in Greater Cincinnati will have one-time costs (truck purchase, kitchen equipment, permits) and recurring costs (fuel, food supply, commissary kitchen rental).

Estimate Your One-Time Startup Costs

Whether you’re starting a salon or a home-based tutoring business, begin by listing all items you must purchase before launching. 

Common One-Time Costs: 

Pro Tip for Cincinnati/NKY Startups: 
Cities like Cincinnati, Covington, Bellevue, and Newport often require additional permits for signage or food operations. Always check your local municipality’s requirements before budgeting. Also, consider business taxes in your target municipality. 

Estimate Your Ongoing Monthly Costs

Once your business is up and running, you’ll have recurring expenses that keep operations moving. A good way to estimate these is to think about what it takes to operate for 30 days and then sort each cost into one of two categories:

- Fixed Costs: Stay the same month to month 
- Variable Costs: Change based on customer demand, seasonality, or usage 

Below is a guide to help you categorize common expenses. 

Fixed Monthly Costs (Generally Stable All Year)

- Rent or mortgage 
- *Staff wages (employees typically work set schedules and expect predictable pay) 
- Monthly contractor retainer fees (if you negotiate a fixed number of hours) 
- Utilities (these vary slightly but can be budgeted consistently) 
- Software subscriptions (booking tools, payroll systems, accounting platforms) 
- Insurance premiums (usually locked in for 12 months) 
- Loan payments (term loans have consistent monthly payments) 

Variable Monthly Costs (Fluctuate Month to Month) 

- Inventory restocking (depends on customer demand) 
- Contractor hourly work (if paying as-needed rather than a retainer) 
- Marketing and paid advertising (often adjusted based on promotions or season) 
- Merchant services fees (based on number of card transactions) 
- Transportation and fuel (varies with travel or delivery volume) 
- Line of credit payments (you only pay on the amount you draw)

Example: A salon in Covington may experience a mix of fixed and variable costs: 

Fixed Costs 
- Chair rental or suite rent 
- Online booking software 
- Equipment like blow dryers, irons, and tools (usually fixed during the first year) 

Variable Costs 
- Product restocking (shampoo, color, styling products) 
- Credit card processing fees 
- Local advertising boosts 

*Note that many entrepreneurs advise banking six months of salary in the event proceeds from your early months in business do not produce enough profit to pay yourself. 

Don’t Forget These Commonly Overlooked Costs

New business owners often underestimate or overlook hidden costs like:

- Working capital: The cash cushion you need for the first 3–6 months 
- Taxes: Federal, state, and city where applicable 
- Permits/renewals: Food licenses, vendor permits 
- Insurance deductibles 
- Professional services: Attorneys, consultants 
- Employer costs: Payroll taxes, onboarding expenses 
- Technology upgrades: Software renewals, equipment replacement 

Reminder: Every business needs a buffer. Unexpected repairs, slow sales months, or delayed customer payments can strain early cash flow. 

Calculate One-Time vs Recurring Costs Together

Now that you’ve identified your expenses, combine them into a single picture. 

Your Budget Should Include: 
- Total One-Time Startup Costs 
- Total Monthly Operating Costs 
- Working Capital Target (3–6 months recommended) 
- Contingency Buffer (usually 10–15%) 

This produces your realistic “startup funding need.” 

Example: A Cincinnati mobile pet groomer might calculate: 

- One-Time Costs: $18,000 (vehicle, equipment, branding) 
- Monthly Costs: $2,500 (fuel, supplies, technology for scheduling and communicating to customers, insurance) 
- 3-Month Working Capital: $7,500 
- Total Startup Need: ~$28,000 

Use Market Research to Refine Your Numbers

Even conservative estimates benefit from real-world validation. 

Ways to Validate Costs: 
- Get quotes from 2 to 3 local vendors 
- Compare software pricing across platforms 
- Ask SCORE Greater Cincinnati mentors for industry benchmarks 
- Review competitors’ service pricing 
- Talk to other small business owners in similar fields working in noncompete markets 
- Research state licensing fees for OH/KY 

A data-backed cost estimate increases credibility with lenders, investors, and partners. 

Review and Adjust Before Finalizing

Your first estimate is a draft, not the final number. Revisit your assumptions monthly as you: 
- Learn more about your industry 
- Gather actual costs 
- Identify savings or efficiencies 
- Update your business model 

Most new business owners refine their startup costs 2–3 times before launching. 

What Lenders Want to See

Banks appreciate when new business owners: 
- Understand their real startup needs 
- Have a clear picture of cash flow – how much, how soon, how consistent 
- Demonstrate financial planning and responsibility – your own credit rating will be a key factor in deciding whether to approve a loan or line of credit 
- Show realistic, conservative estimates of costs versus projected revenue. 
- Can support their numbers with quotes or research 

Accurate startup costs demonstrate preparedness and strengthen your credibility. 

Ready to Build Your Business? 

Understanding your startup costs is one of the smartest early steps you can take as a business owner. With the right plan, and the right partners, you’ll be well-positioned to launch with confidence. 

If you'd like help reviewing your budget or exploring funding options, our business banking team is here to help. Contact a Commercial Lender.