Many new ventures run short of money not because the idea is wrong, but because the setup cost was underestimated. This guide shows how to calculate startup costs properly, including the working capital you need before sales cover your bills.
1. List one-time setup costs
Group them by category: registration and legal, deposits and fit-out, equipment, initial stock, branding and website. Record an estimate for each and the actual cost once paid.
2. List monthly running costs
Rent, salaries, utilities, marketing, software and loan EMIs continue every month whether or not you have sales. Total them as your monthly running cost.
Example
| Item | Amount (₹) |
|---|---|
| One-time setup costs | 4,00,000 |
| Contingency (10%) | 40,000 |
| Working capital (3 months × ₹1,00,000) | 3,00,000 |
| Total needed | 7,40,000 |
| Funding secured | 5,50,000 |
| Funding gap | 1,90,000 |
3. Add working capital and contingency
Working capital covers running costs until revenue catches up, often three to six months. Add a contingency, such as 10% of setup costs, for surprises.
4. Match funding and estimate payback
List funding sources as secured or expected. Funding gap = total needed − funding secured. Payback months = setup cost ÷ expected monthly profit.
Common underestimates
Deposits and advance rent
These can be several months of rent paid up front.
Time to first sales
Licences, fit-out and hiring often take longer than planned, so running costs start before revenue.
Initial stock
Opening inventory ties up cash before a single sale.
FAQs
What counts as a startup cost?
Any cost you must pay before or shortly after opening, both one-time and the first months of running costs.
How much contingency should I add?
Ten to twenty percent of setup costs is common, more if the plan has many unknowns.
Should loans count as funding?
Yes, but include their EMIs in your monthly running costs.
Get the template
The ReadySheets Startup Cost Calculator totals setup and running costs, adds contingency and working capital, tracks funding and shows the funding gap and payback time on a dashboard. Pair it with the Simple Business Plan.
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