Startup

How Much Does It Cost to Build a Startup?

Yeah, I know one startup does not equal another startup. But let’s say you want to build more or less a typical web business, web startup. Some SaaS business, an ecommerce store, an app or something similar.

Yeah, I know one startup does not equal another startup. But let’s say you don’t need to buy expensive licenses or technologies. You don’t need to hire extremely expensive scientists. You want to build more or less a typical web business, web startup. Some SaaS business, an ecommerce store, an app or something similar.

I won’t say anything about marketing or sales costs. These costs depend on too many factors (your marketing/sales/growth strategy).

I’m going to focus only on building a product/prototype/MVP/startup. In such case your costs could be split into three parts:

  1. Costs of having a company
  2. Costs of building a product/tool
  3. Costs of production environment

Let say you’re going to build your startup in half a year.

Costs of having a company

I don’t recommend registering the company at the beginning. First I would suggest working on building the product and once you know that you’re going to build something worth your time – then register the company.

But let’s say you’re impatient and you already have your company registered.

Your costs are as follows:

  • Accountancy – someone has to take care of your invoices and taxes – you don’t have too many invoices at this stage, so $300 per month should be enough
  • Lawyers – someone has to write your Terms of Service, Privacy Policy and also maybe some contracts or agreements – at the beginning there is not so much work to do for lawyers, so one-time cost of $500 should be enough
  • Other costs – there’s always something to pay for – let say $100 per month

At the beginning you don’t need any fancy office, you don’t need to register your trademark or have a conference room for meetings.

Costs of building the product/tool

Those are the most difficult costs to calculate. Costs of building the product/tool depend on skills you have and skills your co-founders have.

The most important thing at this stage: someone has to build this tool. You need to have someone that is able to code.

If you don’t have tech skills, you are not able to code and your co-founder is not a tech guy too – better find the co-founder with such skills. If not – you will need to hire a programmer, which I don’t recommend at this stage.

For the rest you can hire someone and pay for his or her work.

So let’s say you are the business/product guy and you have a co-founder that is able to code. You don’t need to buy any servers (tech guy can develop on his own computer), there’s no need to buy any specific programs, licenses or pay for code repositories. There are lots of open sources or simply free programs and services that could be used to develop your tool.

In such a scenario you have costs as follows:

  • Graphic designer – someone has to design the logo and a layout of your tool – one-time cost of $1000
  • Front-end developer/webmaster – someone has to cut your layout and make HTML/CSS code for you – one-time cost of $700

Costs of production environment

If you have your tool ready – you need to show it to the world. To do this you simply need two things: domain and server.

So the costs are as follows:

  • Domain – let’s say it’s one-time cost of $5
  • Server – let’s say you need some cloud hosting, not the cheapest one, but also not the biggest one – $20 per month

The other costs

No, there’s no place for other costs. You don’t need to travel and attend conferences at this stage; you don’t need to pay for ads, for an office, or even for SSL at this stage.

You don’t need to buy other SaaS services at this stage.

And what’s even more important – you don’t need to hire more people at this stage.

Now you just need to focus on building your product. And only on this.

Summary

Let’s sum up all of that…

We said that it’s going to take you 6 months to build the product. So overall cost of the whole product/startup is as follows:

($300*6) + $500 + ($100*6) + $1000 + $700 + $5 + $20 = $4 625

A lot or not? It depends. I would say it’s not a fortune. You are able to invest such an amount of money on your own, without raising money from an investor.

Especially that for sure you can also do it even cheaper (e.g. do not register the company at the beginning, find a cheaper graphic designer or webmaster, find some cheaper hosting service etc.).

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