Is it a New Year's resolution to start your company? Here's what sort of dollar signs to factor in. Graphic by Miguel Tovar/University of Houston

The process of opening a small business is already stressful enough without even worrying about how to fund it. But it’s good to start thinking about business costs early in order to know where the money will go.

Sammi Caramela, a Business News Daily contributing writer, said in an article to “be realistic” when considering how much starting a business is going to cost. She mentions that things like office space, legal fees, payroll, business credit cards and other organizational expenses are all things that need to be taken into account before even starting.

Caramela offers five things that prospective business owners should do if they don’t know where to start when it comes to funding their company.

Keep a healthy skepticism

Caramela advises to not invest too much money too quickly. You should have a good level of skepticism to balance the optimism you have going into the process. The best thing to do is to is to “start small” and workshop your idea or product on a very small budget.

“If the test seems successful, then you can start planning your business based on what you learned,” Caramela said.

Don't underestimate expenses

Caramela goes on to note that “according to the U.S. Small Business Administration, most microbusinesses cost around $3,000 to start, while most home-based franchises cost $2,000 to $5,000.”

Obviously, every new business is different and will require different expenses. It’s estimated that a prospective entrepreneur will need about six months’ worth of their starting expenses once they open.

“When planning your costs, don’t underestimate the expenses, and remember that they can rise as the business grows…It’s easy to overlook costs when you’re thinking about the big picture, but you should be more precise when planning for your fixed expenses,” serial entrepreneur Drew Gerber told Caramela.

Don’t let your business fail just because you ran out of money. The excitement of starting a company can cause you to overestimate your revenue and underestimate costs.

Distinguish types of business costs

Caramela offers several examples of the type of costs that perspective business owners should consider.

One-time vs. ongoing costs

One-time costs are those that will only need to be paid once. These mostly occur at the beginning of the process. These expenses included things like incorporating a company and equipment purchases.

Ongoing costs are paid regularly, like utilities.

Essential vs. optional costs

“Essential costs are expenses that are absolutely necessary for the company’s growth and development. Optional purchases should be made only if the budget allows,” Caramela said.

Fixed vs. variable costs

Rent would be an example of a fixed expense because it stays the same from month to month. Variable expanses, however, “depend on the direct sale of products or services.” Expect fixed costs to consume most of the company’s revenue in the beginning. If the company grows and is successful, these fixed costs won’t make or break you.

The Most Common Expenses

Caramela composed a list of expenses new business owners will most likely experience.

  • Web hosting and other website costs
  • Rental space for an office
  • Office furniture
  • Labor
  • Basic supplies
  • Basic technology
  • Insurance, license or permit fees
  • Advertising or promotions
  • Business plan costs

She also provides examples and estimated costs.

ItemEstimated Cost
Rent$2,750
Website$2,000
Payroll$175,000
Advertising/Promo$5,000
Basic Office Supplies$80
Total (Annual)$184,830

Want more information? Here are 14 types of business startup costs to consider when launching your company from NerdWallet.

Estimate revenue

“Bill Brigham, director of the New York Small Business Development Center in Albany, advises new business owners to project their cash flows for at least the first three months of the business’s life. He said to add up not only fixed costs but also the estimated costs of goods and best- and worst-case revenues,” Caramela said.

If possible, it’s best to not borrow at all when starting a new business. “Borrowing puts a lot of pressure on any business” and it doesn’t allow for very much wiggle room in the finances.

Factor in funding

If you’re going to borrow, here are a few things you can do. “Personal savings, loans from family and friends, government and bank loans and government grants” are all sources of funding that potential business owners can utilize. Camarela said that most companies use a combination of several of these methods for funding.

Though self-funding is the best option, there’s also options like business credit cards and angel investors.

Caramela suggests to check out SCORE for trainings and workshops targeted toward small business owners and aspiring entrepreneurs. They also offer some counseling.

What's the big idea?

Starting a business is stressful in any case but now that you know how much money it’s actually going to take, don’t let lack of money stop you from making that next step and starting your business. Remember, skepticism is good but only if it’s a healthy amount. Now you know it’s an expensive process and the different types of funding you will need, but even if you aren’t able to fund it yourself, there are other options out there for you as long as your company is financially able to handle the commitment of borrowing.

------

This article originally appeared on the University of Houston's The Big Idea. Cory Thaxton, the author of this piece, is the communications coordinator for The Division of Research.

Ad Placement 300x100
Ad Placement 300x600

CultureMap Emails are Awesome

Rice University MBA programs rank among top 5 in prestigious annual report

top of class

Rice University’s Jones Graduate School of Business MBA programs have been ranked among the top five in the country again in The Princeton Review’s 2025 Best Business Schools rankings.

The university's MBA program in finance earned a No. 3 ranking, climbing up two spots from its 2024 ranking. Finance MBA programs at the University of Virginia's Darden Graduate School of Business and New York University's Leonard N. Stern School of Business were the only ones to outrank Rice, claiming No. 2 and No. 1 spots, respectively.

Rice's online MBA program was ranked No. 5, compared to No. 4 last year. Indiana University's Bloomington Kelley School of Business' online program claimed the top spot.

“These rankings reflect the commitment of our faculty and staff, the drive and talent of our students and the strong support of our alumni and partners,” Peter Rodriguez, dean of Rice Business, said in a news release. “They are exceptional honors but also reminders — not just of our top-tier programs and world-class faculty and students but of our broader impact on the future of business education.”

Rice also ranked at No. 6 for “greatest resources for minority students."

The Princeton Review’s 2025 business school rankings are based on data from surveys of administrators at 244 business schools as well as surveys of 22,800 students enrolled in the schools’ MBA programs during the previous three academic years.

"The schools that made our lists for 2025 share four characteristics that inform our criteria for designating them as 'best': excellent academics, robust experiential learning components, outstanding career services, and positive feedback about them from enrolled students we surveyed," Rob Franek, The Princeton Review's editor-in-chief, said in a press release. "No b-school is best overall or best for all students, but to all students considering earning an MBA, we highly recommend these b-schools and salute them for their impressive programs."

Rice's finance program has ranked in the top 10 for eight consecutive years, and its online MBA has ranked in the top five for four years.

Rice and the University of Houston also claimed top marks on the Princeton Review's entrepreneurship rankings. Rice ranks as No. 1 on the Top 50 Entrepreneurship: Grad list, and the University of Houston ranked No. 1 on Top 50 Entrepreneurship: Ugrad. Read more here.

Houston named ‘star’ metro for artificial intelligence in new report

eyes on AI

A new report declares Houston one of the country’s 28 “star” hubs for artificial intelligence.

The Houston metro area appears at No. 16 in the Brookings Institution’s ranking of metros that are AI “stars.” The metro areas earned star status based on data from three AI buckets: talent, innovation and adoption. Only two places, the San Francisco Bay Area and Silicon Valley, made Brookings’ “superstar” list.

According to Brookings, the Houston area had 11,369 job postings in 2024 that sought candidates with AI skills, 210 AI startups (based on Crunchbase data from 2014 to 2024), and 113 venture capital deals for AI startups (based on PitchBook data from 2023 to 2024).

A number of developments are boosting Houston’s AI profile, such as:

Brookings also named Texas’s three other major metros as AI stars:

  • No. 11 Austin
  • No. 13 Dallas-Fort Worth
  • No. 40 San Antonio

Brookings said star metros like Houston “are bridging the gap” between the two superstar regions and the rest of the country. In 2025, the 28 star metros made up 46 percent of the country’s metro-area employment but 54 percent of AI job postings. Across the 28 metros, the number of AI job postings soared 139 percent between 2018 and 2025, according to Brookings.

Around the country, dozens of metros fell into three other categories on Brookings’ AI list: “emerging centers” (14 metros), “focused movers” (29 metros) and “nascent adopters” (79 metros).