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Here’s How Much it Costs to Start a Business in Every Industry

Written by Guest Post

Using data from the Census Bureau, LendingTree researchers estimated the average startup costs for businesses in a wide range of industries. Most business owners (21%) launch their venture with less than $5,000. But initial costs could exceed $3 million, depending on industry and other startup factors.

Our findings include both average and median costs to start a business. Because the average takes into account businesses with costs into the millions, it often skews high. The median cost reflects the midway point – 50% of businesses cost less and 50% of businesses cost more – and is typically lower than the average.

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Methodology

In order to estimate mean startup costs, researchers used survey data from the U.S. Census Bureau. Researchers found the total amount of capital used to start or acquire a business and divided that amount by the total number of firms that reported financial estimates. Those financial estimates were provided in ranges. To make our estimates, we assumed that businesses used the average of the range to fund their business.

For example, 295,500 firms reported using between $5,000 and $9,999 to start their business. To estimate the total capital amount used, we assumed the average firm in that range used $7,500, which is halfway between $5,000 and $9,999. Companies that reported costs of $3 million or greater were not included in the analysis because without a fixed range, we cannot make estimates.

To estimate median startup costs, we used the distributions provided by the Census. We determined the startup cost range where the median would fall: less than $5,000, $5,000 to $9,999, $10,000 to $24,999, $25,000 to $49,999, $50,000 to $99,999, $100,000 to $249,999, $250,000 to $999,999, $1 million to $2.9 million and $3 million or more. Assuming all the firms were evenly distributed throughout the range, we then found what percent of the way into the range the median would be, giving us a way to derive the median.

Data comes from the U.S. Census Bureau’s 2016 Survey of Entrepreneurs.

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1. Management of companies and enterprises

Total capital used to start business: $2,049,880,000

Number of businesses: 4,651

Average capital needed to start business: $440,740

Estimated median amount of capital needed to start a business: $191,762

Among the 4,651 firms that reported costs, the average amount of capital needed to start a business in this industry is $440,740. The total amount spent to start all of the reporting firms surpassed $2.05 billion.

Industry employees in this sector include accountants, bookkeepers, financial managers, office managers and general managers. They may handle financial planning or other administrative tasks for companies that prefer a third party versus in-house management.

Initial expenses may include office space, either purchased or leased, accounting or bookkeeping software, liability insurance, marketing, business licenses and various office supplies. You may be able to start a management business for less than average. The median startup cost is $191,762, although it’s the highest median price tag in our study.

Image Credit: Deposit Photos.

2. Utilities

Total capital used to start business: $284,007,500

Number of businesses: 1,069

Average capital needed to start business: $265,676

Estimated median amount of capital needed to start a business: $88,333

On average, it costs $265,676 to open a utilities business, earning the industry a No. 2 spot in our study. However, the industry had the lowest response rate with 1,069 companies reporting costs. The amount all reporting utilities companies spent to get started totaled more than $284 million.

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Electric power, natural gas, steam supply, water supply and sewage removal businesses are categorized in the utilities industry. These businesses rely on skilled experts and workers, as well as expensive machinery. Business owners may need to purchase land as well to gain access to resources like oil and natural gas. Even with the low number of respondents, the utilities industry had the third-highest median startup cost in our study at $88,333.

Image Credit: Deposit Photos.

3. Accommodation and food services

Total capital used to start business: $56,068,572,500

Number of businesses: 221,867

Average capital needed to start business: $252,713

Estimated median amount of capital needed to start a business: $93,621

The No. 3 industry falls just below utilities with average startup costs of $252,713. The number of respondents totaled 221,867 firms, and those business used a combined total of more than $56 billion in startup capital.

As mentioned earlier, this sector comprises high-end hotels and restaurants and smaller businesses, such as fast-food restaurants. Luxury establishments skew the average cost, but the median cost to start a business in the accommodations and food services industry is still our second highest at $93,621.

The location itself is typically the main cost driver in this industry. In addition to the space, interior and exterior finishes and equipment, restaurant owners also spend money on marketing, inventory and staff. Additional costs for hotel owners could include recreational spaces and food and beverage options.

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4. Mining, quarrying, and oil and gas extraction

Total capital used to start business: $23,223,472,500

Number of businesses: 105,570

Average capital needed to start business: $219,982

Estimated median amount of capital needed to start a business: $48,334

Image Credit: Deposit Photos.

5. Manufacturing

Total capital used to start business: $23,223,472,500

Number of businesses: 105,570

Average capital needed to start business: $219,982

Estimated median amount of capital needed to start a business: $46,997

Image Credit: Deposit Photos.

6. Arts, entertainment, and recreation

Total capital used to start business: $9,000,657,500

Number of businesses: 42,462

Average capital needed to start business: $211,970

Estimated median amount of capital needed to start a business: $35,004

Image Credit: Deposit Photos.

7. Agriculture, forestry, fishing and hunting

Total capital used to start business: $2,264,125,000

Number of businesses: 11,642

Average capital needed to start business: $194,479

Estimated median amount of capital needed to start a business: $43,865

Image Credit: Deposit Photos.

8. Health care and social assistance

Total capital used to start business: $54,614,760,000

Number of businesses: 289,986

Average capital needed to start business: $188,336

Estimated median amount of capital needed to start a business: $54,874

Image Credit: Deposit Photos.

9. Real estate and rental and leasing

Total capital used to start business: $22,699,252,500

Number of businesses: 122,282

Average capital needed to start business: $185,630

Estimated median amount of capital needed to start a business: $20,851

Image Credit: Deposit Photos.

10. Retail trade

Total capital used to start business: $53,935,260,000

Number of businesses: 300,333

Average capital needed to start business: $179,585

Estimated median amount of capital needed to start a business: $57,866

Image Credit: Deposit Photos.

11. Wholesale trade

Total capital used to start business: $23,696,875,000

Number of businesses: 133,923

Average capital needed to start business: $176,944

Estimated median amount of capital needed to start a business: $38,640

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12. Information

Total capital used to start business: $4,938,982,500

Number of businesses: 29,146

Average capital needed to start business: $169,457

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Estimated median amount of capital needed to start a business: $23,227

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13. Industries not classified

Total capital used to start business: $1,724,597,500

Number of businesses: 10,714

Average capital needed to start business: $160,967

Estimated median amount of capital needed to start a business: $34,874

Image Credit: Deposit Photos.

14. Finance and insurance

Total capital used to start business: $15,629,310,000

Number of businesses: 111,139

Average capital needed to start business: $140,628

Estimated median amount of capital needed to start a business: $28,818

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15. Other services

Total capital used to start business: $22,511,192,500

Number of businesses: 184,472

Average capital needed to start business: $122,030

Estimated median amount of capital needed to start a business: $32,067

Image Credit: Deposit Photos.

16. Transportation and warehousing

Total capital used to start business: $9,181,427,500

Number of businesses: 78,396

Average capital needed to start business: $117,116

Estimated median amount of capital needed to start a business: $30,757

Image Credit: Deposit Photos.

17. Educational services

Total capital used to start business: $2,635,407,500

Number of businesses: 32,045

Average capital needed to start business: $82,241

Estimated median amount of capital needed to start a business: $23,365

Image Credit: Deposit Photos.

18. Professional, scientific, and technical services

Total capital used to start business: $29,009,655,000

Number of businesses: 402,654

Average capital needed to start business: $72,046

Estimated median amount of capital needed to start a business: $9,952

The average amount to start a professional, scientific and technical services firm is $72,046. The median figure is the lowest in our study, at $9,952. For the 402,654 responding companies, startup costs totaled $29 billion.

This sector typically includes accountants, auditors, architects, lawyers and analysts. Office space would likely be the largest upfront expense. Lawyers, for example, should expect to put the bulk of their startup money toward office furniture and supplies, as well as professional licenses and insurance. Equipment like a computer, printer, phone, document scanner and software could also add up.

Image Credit: Deposit Photos.

19. Administrative and support and waste management and remediation services

Total capital used to start business: $10,958,537,500

Number of businesses: 157,657

Average capital needed to start business: $69,509

Estimated median amount of capital needed to start a business: $12,549

Starting a business in this industry is slightly more expensive than starting in construction. The average amount of money needed to start a company is $69,509. The total startup costs for the 157,657 respondents amounted to $10.9 billion. The median amount of capital needed was among the lowest at $12,549.

Janitorial services, landscaping, security and groundskeeping lands in this category. These businesses tend to have minimal startup requirements. Initial expenses for a cleaning service, for instance, typically involve only supplies and labor costs.

Image Credit: Deposit Photos.

20. Construction

Total capital used to start business: $20,216,477,500

Number of businesses: 300,176

Average capital needed to start business: $67,349

Estimated median amount of capital needed to start a business: $12,390

The construction industry has the lowest average startup costs in our study at $67,349. And though 300,176 firms reported costs, their combined startup expenses cracked just $20.2 billion. The median cost is $12,390, which is in our second-to-last spot.

Startup costs for construction businesses could include raw materials needed for projects, tools and equipment, labor, insurance, permits and licenses. Costs could be somewhat controlled, as project size and company needs would affect overall expenses.




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