How it works
Starting a business has two kinds of cost: one-time costs you pay once (equipment, licences, a website) and recurring costs you pay every month (rent, salaries, software). Founders often budget the first and forget the second — but the monthly burn is what decides how long your money lasts.
The first-year total is the number to raise or save before you start: one-time costs plus twelve months of burn. If that number is bigger than the money you have, cut the monthly costs first — they repeat every month.
Formula
Total one-time cost = sum of all one-time costs. Monthly burn = sum of all monthly costs. First-year total = one-time costs + 12 × monthly burn.
What each input means
- Equipment: One-time: computers, tools, machines, furniture — anything you buy once to start.
- Licences & registration: One-time: business registration, licences, and permits.
- Website & branding: One-time: website build, logo, and branding.
- Launch marketing: One-time: launch ads, printed materials, and opening promotions.
- Legal & accounting setup: One-time: lawyer and accountant fees for setting up the business.
- Other one-time costs: One-time: anything else you pay once — deposits, initial stock, training.
- Rent & utilities: Monthly: office or shop rent, electricity, water, and internet.
- Salaries (incl. your own): Monthly: wages for staff — and the minimum you need to pay yourself to live on.
- Software & subscriptions: Monthly: software, apps, and subscriptions the business needs every month.
- Ongoing marketing: Monthly: regular ads, social media, and content costs.
- Other monthly costs: Monthly: anything else that repeats every month.
Worked example: a small service business
- One-time costs: equipment $5,000, licences $1,200, website $800, launch marketing $1,500, legal $1,000, other $500 → $10,000
- Monthly costs: rent $1,200, salaries $4,000, software $200, marketing $500, other $100 → $6,000 per month
- First-year total: $10,000 + 12 × $6,000 = $82,000
- That $82,000 is the money to have ready before you start — it buys twelve months of runway.
Frequently asked questions
What should I include in one-time costs?
Anything you pay once to get started: equipment, licences and registrations, legal fees, a website build, branding, and your first batch of stock or materials.
What is monthly burn?
The total of your recurring monthly costs — rent, salaries, software, and marketing. It is the speed at which your bank balance falls before the business earns money.
How much runway does the first-year total give me?
Twelve months. If you raise or save the first-year total, you can run for a year without revenue. Most advisers suggest 12–18 months of runway for a new business.
Should I include my own salary?
Yes — put the minimum you need to live on under monthly salaries. Founders who pay themselves nothing run out of personal savings and quit early.