When calculating startup costs, take a thorough, realistic approach. Start by listing every possible expense, from large items like equipment and licenses to smaller, easily overlooked costs such as business insurance, software subscriptions, and basic office supplies. To ensure you’re prepared, add an extra 30% to your total estimate as a buffer for unexpected costs. These surprises can add up quickly and put a strain on your finances if not accounted for.

It’s helpful to break your costs into two categories: one-time expenses and recurring monthly needs. For example, you might need $12,000 upfront to cover equipment, licenses, and marketing materials, but your recurring expenses, such as rent, utilities, and subscriptions, may amount to $2,000 per month. Understanding both types of costs ensures you’re financially prepared not just to start your business but to sustain it during the critical early months.

Don’t overlook personal expenses during this time. If you have a mortgage, dependents, or other financial commitments, ensure you can meet them while your business gets off the ground. Consider opportunity costs as well—if you’re leaving a stable job to start your business, factor in the salary and benefits you’re giving up, as they play a significant role in your financial picture.