How to work out what a startup actually costs
Startup costs split into two kinds that behave completely differently. One-time costs — incorporation, equipment, deposits, a website, initial inventory — are paid once and then gone. Recurring costs are the rent, salaries, subscriptions and services that arrive every month whether or not you have made a sale yet. Adding them into a single total hides the distinction that matters most.
The costs founders systematically forget are the small recurring ones: software seats, payment gateway fees, accounting and legal retainers, insurance, domain and hosting renewals, bank charges. Individually each looks negligible. Together they routinely account for a meaningful slice of monthly burn, and because they renew silently they are rarely budgeted.
The number to plan against is not the launch total — it is runway. Runway is how many months the capital you have left will cover your monthly burn before revenue has to carry you. A business can be fully funded on the launch checklist and still fail four months in, because nobody costed the gap between opening the doors and the first profitable month.
Worked example
A small services business planning for six months of runway. One-time setup comes to 4,50,000 and the monthly recurring cost is 1,85,000, with a 15% contingency applied to the subtotal.
| Input | Value |
|---|
| One-time setup costs | 4,50,000 |
| Monthly recurring cost | 1,85,000 |
| Recurring over 6 months | 11,10,000 |
| Subtotal | 15,60,000 |
| Contingency (15%) | 2,34,000 |
| Total capital needed | 17,94,000 |
| Runway on 20,00,000 raised | 8.4 months |
The launch total everyone quotes — 4,50,000 — is only about 25% of the capital the business actually needs. The other three quarters is the cost of staying alive long enough to find customers. Raise 20,00,000 instead and the runway extends to roughly 8.4 months, which is the figure worth negotiating over.
How to use this calculator
- List one-time and recurring costs in separate columns — never in one combined total.
- Go through a full month of bank and card statements from a comparable business, or your own, to catch the recurring items you would otherwise omit.
- Decide how many months of runway you need before revenue covers the burn, then be honest and add a few more.
- Apply a contingency of at least 10% to the subtotal; first-time founders should lean towards 20%.
- Read the runway figure, not the launch total — that is the number that determines whether the business survives.
Frequently asked questions
How much contingency should I add?
Commonly 10-20% of the subtotal. Lean towards the higher end if you have not run this type of business before, if you are dependent on a build or a fit-out, or if any single supplier quote is still an estimate rather than a signed price.
Should I include my own salary in the costs?
Yes, if you need to live on it. A plan that works only because the founder is unpaid is not a plan that works — it has simply moved the shortfall onto your personal finances, where it will surface as pressure to take bad decisions early.
Which costs do founders most often forget?
Recurring small-ticket items: software subscriptions, payment processing fees, accounting and legal retainers, insurance, hosting and domain renewals, bank charges, and equipment replacement. Also deposits — security deposits on premises tie up capital that never appears in a profit and loss statement.
How long should my runway be?
It depends entirely on how long your sales cycle takes. A business selling to consumers may see revenue in the first month; one selling to enterprises can wait two or three quarters for a first contract. Size runway against your actual sales cycle, not a generic figure.
Is it better to underestimate or overestimate startup costs?
Overestimate. Underestimating means raising a second round from a position of weakness, at a worse price, while distracted by the cash crisis that forced it. Surplus capital costs you a little dilution; a shortfall can cost the business.
Do one-time costs really only happen once?
Mostly, but equipment wears out and licences renew. Treat genuinely durable purchases as one-time, and anything with a replacement cycle under three years as a recurring cost amortised across its life. That keeps your monthly burn honest.
This calculator is an educational tool. Results are estimates based on the inputs you provide and do not constitute financial advice. Verify figures with your bank, broker or a qualified advisor before acting on them.