Thinking about starting a small business in Canada? Starting a small busienss is exciting since you have a chance to show case all of your talents and put forth your experiences you’ve learnt in order to crate a business of your own which you believe in. But the process isn’t simple. Starting a small business requires time, dedication and yep money! So, what are the small business startup costs?

Small Business Startup Costs: How much will it cost?

As a new small business idea comes to mind, typically you’d want to start with writing a business plan. The finances may be hard to figure out so early on but if you start with the business plan you will slowly start to realize the small business startup costs that you have to make and you will have a better understanding of how much it will all cost.

If you’re organized and through, you can plan out your business and your financials and keep your small busienss startup costs and budget low and on track.

While small business startup costs can vary from location to location and industry to industry, there are certain costs associated with starting a business that will always remain consistent. Be sure to read on to understand the costs of stating up and how to ensure you have the funding you need.

Start your business – but start it small

Every single person coming up with a small business idea at one has had dollar sings in their eyes as they come up with every possibility how this business will make you rich and a millionaire.

It’s great to have high expectations for your company. This is what you should be thinking like.

However, the same train of thought can lead you down the wrong path and pretty much force you to invest too much money way to quickly (especially scary if you’re borrowing the funds to startup).

In the very early stages of starting a small business in Canada, your small business startup costs should well organized and pretty much pre-planned with very little room for unexpected purchases and expenditures (however, always have backup funds set aside for the very unexpected).

Take a second right now and try the Small Business Startup Assessment Tool, and see what stage you’re in, what you still need to succeed and how much funding you may be eligible for from government sources.

When speaking to many business owners that we manage here though CanadaStartups.org, some of the best feedback that we get from those who have succeeded with their startups is to go into business thinking you will fail (at least for the money spending portion of it all). It’s simple really, if you aren’t assuming growth and success you won’t spend frivolously. Success will come naturally if you’re careful.

With any small business starting up where the initial funding amount of capital to start with is a concern, you can always start small, in a very inexpensive way to test out the customer, your products/services and to get a feel for it. If the test you perform seems to be somewhat successful, then go from there and start planning your business further and allocate additional funding to it.

How much a small business startup costs depends on you and how much you’re willing to spend.

Business owners across Canada have been known to spend millions on their startups and fail – while some have spent under $1,000 and have succeeded. Ultimately, how much you spend on your startup is depending on you and your needs.

Estimating your small business startup costs

As mentioned earlier, the costs a small business startup has to cover vary from location to location (Toronto may be more expensive to open a business then a small town in Nunavut), your industry has a big part on the startup costs (if you need to have a machine for your business versus having an online eCommerce store that drop ships products), and of course various other factors such as availability of funds, time to dedicate to the business, employee needs…etc

The basics that costs a small business has to cover initially when starting up can consist of the following:

• Tools and equipment needed
• Business registration and licensing fees
• Office space
• Inventory
• Marketing
• Website
• Internet and phone bill (other utilities)
• Payroll
• Insurance
• Travel
• Shipping costs
• Taxes?

While certain business types can startup with having small business startup costs of under $1,000, an average small business owner in Canada spends about $5,000 to $10,000 to initially start their small business.

One of the main reasons why many small business owners end up failing early on is because they run out of cash. While writing a business plan and forecasting your small business startup costs can help, it doesn’t always end up 100% accurate, especially as a new business not knowing the figures perfectly. It is said to ensure you have 3 months of backup funds available shall you decide to go into business – or at least have it prepared in terms of where to source the funds shall you need it.

Different types of small business startup costs

Not all small business startup costs are the same.

In any given business, there are always one time costs, on-going costs, essential costs, optional costs, fixed costs and variable costs.

So what are the differences you ask?

It is very important as a small business startup to know how much it costs to start the business and with that in mind understanding the different types of small busienss startup costs is critical.

One-time startup busienss costs are those costs that will most likely be relevant only in the early on startup process such as the expenses for registering the business, or maybe a cost to cover the equipment purchase you need..etc This means that the costs for that time-frame will obviously be higher but shall dip the following month as it was a “one time cost”.

Ongoing costs are exactly what it says they are. They are costs that are re-occurring. These type of expenses are predictable as they are usually payroll expenses, or utilities and they don’t often fluctuate.

Essential startup costs are costs associated with starting a business and costs that are absolutely necessary for the busienss to sustain and grow. For example as online ecommerce store, an essential cost would be website development or marketing.

Optional business costs are those costs that you’d simply like to have but are not 100% necessary just now. Think about a painting company that want’s to get the new Mercedes van to do business with (but not just yet because their current van is still pretty good), that is an optional cost. Also known as a “would be nice cost” as in would be nice to have that.

Fixed costs are often costs such as rent, which are consistent month to month.

Variable costs are costs associated with your business that change depending on the situation. For example if you’re a retail store, your inventory is a variable cost. A cost that changes because you don’t know how much you will sell each month.

Projecting your cash flow

When starting a small business, the most difficult thing early on is your business plan and projecting your cash flow in order to figure out how much your busienss will make and how much your small business startup costs and on going costs will be.

While there are tools such as the Business Plan Builder Tool which automatically project your cash flow you may want to have our experts review your startup projections as well.

Projecting your cash flow isn’t very easy but as a startup business owner you do have to get your business plan done. So be sure to enter your expected sales revenues (hopefully you’ve done some research on this and know how much to expect your business to make). It doesn’t have to be 100% accurate, but a approximate estimate. From that, it is recommended to deduct all of your expenses (think marketing, utilities, bills, loans, payment, payroll…everything) and use that to figure out your cash flow and project moving forward.

Money to cover your small business startup costs

After you’ve had a chance to do your business plan, to figure out how much money you need to start your small business, you’ve done your financial projections, the next step is figuring out the money.

Where will the money come from?

Do you have the funds in pocket? Credit card? Line of credit? Consider borrowing from private investors or perhaps try government funding?

Remember how you obtain funds to cover your small business startup costs will affect the future of your small business so it is important to be smart about it.

As mentioned, personal savings, loans from family and friends, bank and government loans, and grants are just a few of the many potential funding sources. Many companies use a combination of sources in the early stages to start up.

To get help from government funding agencies and receive a government grant, a government loan or startup funding from the Canadian government consider using our Funding Calculator Tool to see how much you may be eligible for and see if it’s obtainable for your specific business and industry.