How to Calculate Startup Costs for a Small Business
Your startup cost is not only what you spend to open. It is the one-off launch costs, plus the monthly losses until the business breaks even, plus a cash buffer for what you did not plan. Founders who count only the first part run out of cash just as the business starts to work.
Step 1: list one-off launch costs
- Company registration, licences and permits
- Fit-out, furniture and equipment
- Rent deposits and advance payments
- Website, systems and first software subscriptions
- Opening stock
- Launch marketing
Step 2: list monthly running costs
- Rent and utilities
- Salaries, including your own if you need one to live
- Software, insurance, accounting and legal
- Marketing
- Payment fees and bank charges
Use real quotes where you can. Estimates are usually too low.
Step 3: estimate the months to break-even
Each month, compare gross profit (revenue minus the direct cost of what you sell) with running costs. The gap is your monthly loss. Add up the losses until gross profit covers running costs. Then add a buffer, for example three months of running costs as a rule of thumb, because sales and payments rarely arrive on time.
Worked example in OMR
Illustrative example:
- One-off launch costs: OMR 18,000
- Monthly running costs: OMR 6,000
- Gross profit starts at OMR 1,000 in month 1 and grows by OMR 1,000 a month
- Monthly losses: 5,000, 4,000, 3,000, 2,000, 1,000, then break-even in month 6: total OMR 15,000
- Buffer: three months of running costs: OMR 18,000
- Cash needed: 18,000 + 15,000 + 18,000 = OMR 51,000
Costs founders often miss
- VAT: in Oman, VAT is 5% on most goods and services, and cash can be tied up between paying VAT on purchases and recovering it
- Customers who pay late, while suppliers want cash now
- Deposits and annual fees paid upfront
- Your own salary
- A contingency for delays
Turn the plan into a 13-week cash forecast so you see a gap before it happens.
Frequently asked questions
One-off launch costs, monthly running costs until break-even, and a cash buffer.
How big should my cash buffer be?A common rule of thumb is three months of running costs. Riskier or seasonal businesses need more.
Should I include my own salary?Yes, if you need income to live. Leaving it out makes the plan look better than it is.
Is there a template?Yes. The free templates include a 13-week cash flow forecast you can adapt for a new business.
Want this set up for your startup?
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Written by Akram El-Karrar, CPA, from the work we do for startups every week.