How much money do I need to start a business? Costs explained

“How much money do I need to start a business?” is probably the first question anyone asks when they want to become an entrepreneur, and it is also the one that stops most projects before they begin. The short answer is that it depends enormously on the type of business: some can get going with a few hundred euros, while others need tens of thousands.

The good news is that you do not have to guess. In this guide we explain what makes up the investment needed to open a business in Europe, how much it costs to register as self-employed or set up a company, three illustrative examples with figures, a simple formula to work out how much you need and what to do to start with little money.

Do I need a lot of money to start a business?

Not necessarily. What determines the investment is not so much the business itself as its model: if you need premises, stock, machinery or staff from day one, the figure rises sharply; if you sell your knowledge or your time, it can be very low.

As a very general guide (real figures depend on your city, your sector and your choices):

More important than the starting figure is knowing exactly where every euro will go and how long your business can hold out until it becomes profitable.

The three amounts you need to calculate

Many entrepreneurs only calculate the cost of opening the doors and run out of money within a few months. To avoid that mistake, separate three blocks:

1. Initial investment

Everything you have to pay before selling anything: the deposit and refurbishment of premises, equipment, furniture, initial stock, a website, licences and set-up costs. It is a one-off expense.

2. Working capital

This is the money you need to pay fixed costs while the business is not yet generating enough income: rent, social security contributions, utilities, software, accountancy and advertising. Almost no business is profitable from month one, so the sensible approach is to set aside at least six months of fixed costs.

3. Personal cushion

Besides the business money, you also need to live. If you leave your job to start a business, you need a cushion covering 6 to 12 months of basic personal expenses, kept separate from the business capital. Mixing the two is one of the most common causes of early closure.

The most common costs when opening a business

• Premises: commercial leases usually require a deposit of one or more months’ rent and often additional guarantees. On top of that come any refurbishment, compliance work and furniture.
• Licences and permits: local activity licences and other permits depending on the sector (health, accessibility, signage). Fees vary widely between municipalities.
• Equipment and tools: computer, machinery, card terminal, software and licences.
• Initial stock: if you sell products, your first stock purchase is often one of the biggest items.
• Online presence: domain, website, online shop, photography and brand design.
• Launch marketing: social media or search ads, printed material, opening event.
• Legal and advisory costs: company formation, trademark registration, contracts, accountant.
• Insurance: public liability, premises or equipment insurance.
• Staff: if you hire, remember that the cost to the business is well above the gross salary, because you must add employer social security contributions, which in many European countries range from around 20% to over 30%.
• Your own contributions: self-employed social security payments, which some countries reduce during the first year.

How much does it cost to register a business?

• Sole trader or self-employed: in most European countries registration is free or very cheap. The main cost is your ongoing social security contributions, which vary greatly from country to country and are sometimes reduced for new entrepreneurs.
• Limited company: many countries now allow companies to be set up with very low minimum capital, sometimes from €1, but there are usually notary, registration or publication fees, often a few hundred euros, plus the ongoing cost of formal accounts.

The EU’s Your Europe guide to starting a business explains the registration requirements and links to the official contact point in each country, where you can check the exact costs.

Three illustrative examples

These examples are illustrative and are meant to show the order of magnitude. Your case may be very different depending on your city, sector and what you already own.

Example 1: freelance graphic designer

• Computer and software (if not already owned): €1,000 to €2,000
• Website and domain: €100 to €800
• Fixed costs: social security, software and accountant, around €180 to €400 a month depending on the country
• Recommended total capital (investment + 6 months of fixed costs): roughly €2,200 to €5,000, not counting the personal cushion

Example 2: natural cosmetics online shop

• Initial stock: €3,000 to €6,000
• Online shop, photos and branding: €1,000 to €3,000
• Launch advertising: €1,000 to €2,000
• Fixed costs: platform, contributions, storage, advertising and accountant, around €1,200 a month
• Recommended total capital: between €12,000 and €18,000

Example 3: neighbourhood café

• Deposit and guarantees on premises: €4,000 to €8,000
• Refurbishment, licences and technical project: €15,000 to €40,000
• Machinery, furniture and tableware: €10,000 to €25,000
• Initial stock and launch: €2,000 to €5,000
• Fixed costs: rent, staff, utilities, contributions and suppliers, easily €5,000 a month or more
• Recommended total capital: from €60,000 in many cases

How to work out how much money you need

You can use this simple formula as a starting point:

Capital needed = (initial investment + monthly fixed costs × months until profitable) + contingency margin

For example, for an online shop with an initial investment of €8,000 and fixed costs of €1,200 a month, if you expect it to take six months to cover your costs:

• Initial investment: €8,000
• Six months of fixed costs: 1,200 × 6 = €7,200
• Subtotal: €15,200
• 15% contingency margin: around €2,280
• Total: around €17,500

To estimate how many months it will take to become profitable, calculate your break-even point (the minimum sales needed to cover all your costs) and compare it with a realistic month-by-month sales forecast. If in doubt, be conservative: almost everything costs more and takes longer than planned. Tracking every expense from the start makes this much easier; our selection of the best personal finance apps includes tools that can help.

How to start a business with little money

If your budget is limited, these strategies let you get started without taking too much risk:

• Start from home: avoid premises until demand justifies them.
• Sell a service before a product: it requires no stock and lets you generate income quickly.
• Validate with a pre-sale: get paid before producing or buying stock.
• Buy second-hand or rent equipment: machinery, furniture and computers have a good second-hand market.
• Use free or cheap tools: many website, invoicing and design platforms have free plans to get started.
• Delay hiring: work with freelancers on a project basis before taking on permanent staff.
• Keep a part-time job at first: if you can, keep some income while the business takes off.

Where to get the money

Once you know how much you need, you have to decide where it will come from. The most common routes are your own savings, help from family and friends, bank loans backed by public guarantee schemes, national and regional grants, investors and crowdfunding. The EU also backs more than a thousand banks and funds that lend to small businesses, which you can find by country on the EU’s Access to finance portal. If you are considering private investors, our article on what an angel investor is explains how that route works.

A rule of prudence: do not borrow more than you could repay if the business does not work out, and avoid financing your initial investment with credit cards or payday loans.

Keep track of every euro from day one

Once you are open, the challenge is making the money last. Keep business and personal accounts separate, check your spending against your budget every week and keep a particularly close eye on online costs (advertising, software, subscriptions), which grow without you noticing. A prepaid card can help with the latter: with Bitsa, for example, you load only the amount you have budgeted for each item and can create virtual cards to keep them separate, so no campaign or subscription gets out of hand. You can read more in our article on the benefits of virtual cards. It does not replace your business account, but it sets a clear limit.

Common mistakes when calculating the investment

• Only calculating the opening costs and forgetting the working capital for the first months.
• Not including a contingency margin.
• Being too optimistic about sales in the first months.
• Forgetting taxes: the VAT you charge is not yours and must be paid over regularly.
• Spending too much on image (premises, decoration, logo) before having customers.
• Mixing personal and business money.

The figures in this article are indicative and do not constitute personalised financial, legal or tax advice. Before investing, speak to an adviser and check costs and requirements in your country and municipality.

Frequently asked questions about how much it costs to start a business

Can I start a business with no money?

With no money at all it is very difficult, but some businesses can start with very little, especially professional services that make use of your skills and the equipment you already have. In those cases, the main cost is usually your own social security contributions.

How much does it cost to set up a limited company in Europe?

It depends on the country. Many now allow very low minimum capital, sometimes from €1, but you usually have to add notary, registration or publication fees, often a few hundred euros, plus the recurring cost of an accountant for formal accounts.

How many months of costs should I have saved before starting?

As a guide, at least six months of the business’s fixed costs and, if you leave your job, 6 to 12 months of your basic personal expenses. The more uncertain the business, the more margin you should have.

What businesses can I start with less than €5,000?

Mainly professional services (design, consulting, training, web development, translation), online businesses without stock and activities you can run from home or at clients’ premises. The key is keeping investment in equipment and premises to a minimum.

What happens if I run out of money before becoming profitable?

That is the situation to avoid at all costs. That is why you should calculate your working capital, add a contingency margin and check your cash flow every week. If you see the money is not going to last, act early: cut costs, renegotiate with suppliers or look for funding before it becomes urgent.