How much money do you need to start a business?

When starting a new business, think hard about the likely costs before you pass go. This will help you avoid expensive surprises.

Estimating costs and income is key for any new business, whether you’re a fast-moving start-up or still weighing the pros and cons of chucking in the day job.

These numbers will help you decide if your business is viable or not, and show you a quicker path to breaking even and long-term profitability.

The amount of money it takes to start — and to stay in business — will vary greatly from business to business. This page sets out common steps to work it out.

Overstate rather than understate your estimates.

Overstate rather than understate your estimates.

It’s a good idea to add 20-30% to cover costs you haven’t thought of — unforeseen bills or price rises can quickly add up.

Can you afford it?

Assessing whether you can afford to start a business takes careful consideration. The first thing you should do is analyse your own expenses.

Go through your personal spending with a fine-tooth comb. Add up your mortgage or rent, bills, food, any school fees, and discretionary spending, eg cafes, movies, event tickets.

Look for things you can cut. Add up the items you can’t cut to work out the least amount of money you need to sustain your lifestyle.

Running a business can be incredibly fulfilling, but the early days in particular can be a financial squeeze. Being realistic and honest with yourself from the start will help you avoid financial worries.

Questions to ask yourself before you start

Tally up running costs


Once you’ve thought about the impact on your personal finances, it’s time to focus on how much it will cost to get your business up and running.

One-off costs to start up

These tend to be more expensive items, including:

  • lease or purchase of buildings or land
  • permits, licenses or other compliance costs
  • equipment and/or machinery
  • vehicles
  • shop fittings and/or office furniture
  • branding
  • a website and domain name
  • registering your intellectual property (IP), eg trade marks or patents. Note not all types of IP need to be registered.

Fixed costs

These are bills and other costs you paid on an ongoing basis, also known as overheads.

These tend to be time-related, eg monthly phone bills or quarterly rates payments. Common fixed costs include:

  • insurance
  • utilities, eg electricity and internet
  • rent or mortgage payments
  • wages/salaries.

Variable costs

These are expenses that vary depending on how much, or how little, your business produces.

Common variable costs include:

  • raw ingredients
  • production materials
  • stock orders.

An accountant will be able to run through your projected expenses and pinpoint any others you might not have thought of.

If you’re planning to approach lenders or investors, they will likely be more comfortable supporting your business if you (or someone in your management team) can demonstrate previous business experience. If you are new to business, it helps to build up your skills and experience before seeking investors or applying for big loans.

Lenders and investors will want to know what you personally will invest in your business idea, in terms of money, time and effort.

Checklist of common business assets

Forecast your cash flow

Using your estimated costs, the next step is to do a cash flow forecast for your first 12 months of business. It’s typically a spreadsheet that projects your business’s income and expenses.

It’s common to operate at a loss when you first start a business. Make sure you have enough money in reserve to sustain yourself during this period. A cash flow forecast will help predict if you:

  • are financially prepared to start up
  • might need to borrow money.

Getting paid on time

To help predict your income, use data on your industry type and your competitors.

To help predict your income, use data on your industry type and your competitors.

Talk to advisors

An accountant will give you good insights into how much money you’ll need to get started.

Try to find an accountant or advisor who has a good track record with business similar to your own.

Tips on getting financial advice

Research other businesses in your industry

Another good way to get an idea of profits and costs is to talk to businesses similar to your own. You’ll be surprised how open certain competitors might be to sharing their experiences.

Statistics NZ and Inland Revenue have a range of tools to dig into financial data for your market and your competitors.