What are typical costs for startups?
Startup costs can range from $10,000 to $500,000+ depending on your business type, with employee salaries consuming 50-75% of most startup budgets. Essential expenses include salaries, benefits, office space, technology infrastructure, marketing and administrative costs.
How do you calculate startup costs? Begin by listing all anticipated expenses, including salaries, benefits, marketing, technology, office and administrative to form a comprehensive startup budget.
Salary expenses
If you're building a B2B startup, you'll likely need help with sales. If so, you'll want to consider skills as well as cultural fit. Keep in mind that a strong track record at a large enterprise doesn't always translate to startup success. Your early hires need to be comfortable operating with minimal support infrastructure—no dedicated assistants and no established processes. Cultural fit matters as much as experience when you’re building a lean team, so factor that into your hiring budget and timeline.
Plan for any other key hires you may need depending on what you're doing, like a merchandiser if you're in e-commerce or a designer if you're building hardware, and hire wisely. Across nearly every startup vertical, payroll is the single largest operating expense. Employee compensation typically accounts for 50–75% of your total operating budget, making workforce planning the most important part of your financial forecast.
Be sure to determine how much you need to pay yourself and any co-founders to make ends meet.
Benefit expenses
Next is the cost of benefits, which can come with hidden surprises. Don't overlook benefits costs. Health insurance premiums tend to rise annually at rates that outpace general inflation, so it's important to model escalating benefits expenses across your multi-year financial projections rather than treating them as a fixed line item.
Marketing expenses
Marketing expenses can come in many forms, for example:
- Digital ads
- Discounts and promotions
- Technology needed to support campaigns
Regardless of the type, you're likely going to have to spend some money to acquire customers. The whole reason for expenses in a seed round is to prove product-market fit, so marketing is going to be a lot of your expenses.
Some digital marketing costs start small but add up as you scale. Cloud tools, for example, allow you to target thousands of customers at a relatively low cost. But if you add in digital ads, make sure to account for the cost per click multiplied by the number of people you need to reach—the bill could rise quickly. You may also need:
- Social media management tools
- Design templates for email campaigns and digital flyers
- Access to press release platforms
You may also need to locate resources to help promote your business by developing content marketing and sales collateral or running events and other PR efforts. Those resources will increase your people costs, while events may also require physical products for booths, giveaways and travel costs for team members attending. Marketing expenses could range from 10-30% of total budget for B2C startups and 5-15% for B2B companies.
Technology expenses
The tech services you may need, in addition to basic productivity and communications tools, could include:
- Website hosting
- Optimization and SEO tools
- Automation apps to link all your services
- CRM for your sales success
Other tech costs potentially include computers and phones. Currently, the trend is for employees to bring their own laptops and phones; however, as your company expands, you'll need to factor in providing equipment for your workers (an option that will also improve your security posture).
Another option is to offer a tech stipend instead of purchasing standardized equipment, letting employees choose the devices they prefer. This approach can simplify your IT budget and improve satisfaction, though you'll want to weigh it against security and compliance considerations as your team grows.
Office expenses
Once you're staffing up, you'll need somewhere to put your employees. On that front, things have changed significantly. Many knowledge workers work remotely, reducing the cost for startups. Still, over time you're probably going to need or want office space for some percentage of your employees. Rents in tech hubs like New York and San Francisco are generally highest, followed by places like Austin, Boston or Seattle.
If you have an office, you'll need furniture. That expense can be more significant than you might think. Beyond desks and chairs for employees, you'll eventually need to fit out conference rooms and kitchens as well.
Administrative expenses
There are some necessary one-time costs as well as some lower ongoing costs that you shouldn't ignore.
Registering a business typically involves low state fees plus the cost of legal support. If you are creating a C corporation, the recommended option for many startups, you may end up having to pay for a lawyer. Alternatively, you may be able to use legal cloud service platforms to get basic paperwork in place. You may also need lawyers to develop operating agreements and help you understand how to protect your intellectual property.
Keeping the books in order won't be free. Initially, you could do it yourself using software. But as you grow, complexity will increase fast and you will likely need help to manage your finances and accounting. You should also consider startup insurance, which can add hundreds or thousands to your annual bills. At some point, you may have to spend on services to manage your cap table.
The good news for SVB clients is that they can take advantage of discounts on products and services from our partners. Many of the products and services founders use every day, like the ones mentioned, are available at a discount for SVB clients.
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