The average cost to run a small business is $2,000-$5,000 per month for a solo operation, $10,000-$30,000 per month with employees, and $50,000+ for retail or restaurants. Your actual costs depend on your business type, location, and whether you have employees. Here’s a complete breakdown of monthly expenses—rent, payroll, insurance, marketing, software, taxes—with real numbers so you can budget accurately.
What Does It Cost to Run a Small Business?
Average monthly operating costs:
- Solo/freelance (home-based): $500-$2,000/month
- Small service business (1-5 employees): $10,000-$30,000/month
- Retail store: $20,000-$50,000/month
- Restaurant: $30,000-$100,000/month
- Online business: $500-$5,000/month
These are operating costs only—not including startup expenses or owner salary. Your biggest expenses will typically be payroll (if you have employees), rent, and insurance.
Monthly Business Expenses Breakdown
Rent and Utilities
- Home office: $0-$200 (portion of home expenses)
- Coworking space: $200-$800/month
- Small office (500-1,000 sq ft): $1,000-$3,000/month
- Retail space: $2,000-$10,000/month (varies widely by location)
- Utilities (electric, water, internet): $200-$1,000/month
- Commercial internet: $100-$500/month
Payroll and Labor
Payroll is usually the biggest expense. Budget 1.25-1.4x the base salary to account for employer taxes, benefits, and workers’ comp.
- Full-time employee: $3,500-$8,000/month (including taxes/benefits)
- Part-time employee: $1,000-$2,500/month
- Payroll service (Gusto, ADP): $40-$150/month + $6-$12 per employee
- Contractor/freelancer: Varies by project
Insurance
- General liability: $30-$150/month
- Professional liability (E&O): $50-$200/month
- Workers’ compensation: $50-$300/month per employee (varies by industry)
- Commercial property: $50-$300/month
- Commercial auto: $100-$300/month per vehicle
- Health insurance (employer portion): $300-$600/month per employee
Software and Technology
- Accounting (QuickBooks, Xero): $30-$200/month
- Website hosting: $10-$100/month
- Email marketing (Mailchimp, Constant Contact): $0-$100/month
- CRM (HubSpot, Salesforce): $0-$300/month
- Project management (Asana, Monday): $0-$50/month
- Phone system (business line, VoIP): $20-$100/month
- Point of sale (Square, Clover): $0-$100/month + transaction fees
Marketing and Advertising
- Google Ads: $500-$5,000/month (highly variable)
- Social media ads (Facebook, Instagram): $300-$3,000/month
- SEO services: $500-$2,000/month
- Print materials (business cards, flyers): $50-$300/month
- Local advertising: $100-$1,000/month
Professional Services
- Accountant/bookkeeper: $200-$500/month (or $500-$2,000 annually for tax prep)
- Attorney (on retainer): $200-$500/month
- Notary services (contracts, agreements): $25-$150 per document (use online notarization to save money)
Banking and Payment Processing
- Business bank account: $0-$30/month
- Credit card processing: 2.5-3.5% per transaction
- Payment platforms (Stripe, PayPal): 2.9% + $0.30 per transaction
Costs by Business Type
Online/E-commerce Business
Monthly cost: $500-$5,000
- Website/hosting: $30-$300
- E-commerce platform (Shopify, WooCommerce): $30-$300
- Marketing/ads: $200-$2,000
- Software/tools: $50-$200
- Shipping supplies: $100-$500
- Insurance: $50-$150
Service Business (Consulting, Agency)
Monthly cost: $2,000-$15,000 (solo) | $15,000-$50,000 (with team)
- Office/coworking: $0-$2,000
- Payroll (per employee): $4,000-$8,000
- Software/tools: $100-$500
- Marketing: $500-$3,000
- Insurance: $100-$400
Retail Store
Monthly cost: $20,000-$50,000
- Rent: $2,000-$10,000
- Inventory: $5,000-$20,000
- Payroll: $5,000-$15,000
- Utilities: $300-$800
- Insurance: $200-$500
- Marketing: $500-$2,000
Restaurant
Monthly cost: $30,000-$100,000+
- Rent: $3,000-$15,000
- Food costs (25-35% of revenue): $8,000-$30,000
- Payroll (30-35% of revenue): $10,000-$35,000
- Utilities: $500-$2,000
- Insurance: $300-$800
- Licenses/permits: $100-$500
Hidden Costs Most People Forget
- Self-employment tax: 15.3% of net earnings (if sole proprietor)
- Quarterly estimated taxes: Set aside 25-30% of profit
- Business licenses and permits: $50-$500/year (varies by location)
- Annual report/franchise tax: $50-$800/year (LLC/Corp)
- Registered agent: $100-$300/year (LLC/Corp)
- Equipment maintenance/replacement: Budget 5-10% of equipment value annually
- Bad debt/chargebacks: 1-3% of revenue
- Shrinkage/waste (retail/restaurant): 1-5% of inventory
- Professional development/training: $500-$2,000/year
- Emergency fund: 3-6 months of operating expenses
Ways to Reduce Business Costs
- Start from home — Avoid rent until you need dedicated space
- Use free software tiers — Most tools offer free versions for small operations
- Outsource instead of hiring — Use contractors for tasks you don’t need full-time
- Negotiate with vendors — Ask for discounts, especially for annual payments
- Bundle insurance policies — Business Owner’s Policy (BOP) saves 10-20%
- Use online notarization — BlueNotary is $25 vs. $100+ for mobile notaries for contracts
- Automate repetitive tasks — Email sequences, invoicing, scheduling
- Review expenses quarterly — Cancel unused subscriptions and renegotiate contracts
First Year Budget Template
One-Time Startup Costs
- Business registration (LLC/Corp): $50-$500
- Business licenses/permits: $50-$500
- Website design: $0-$5,000
- Initial equipment: $500-$10,000+
- Initial inventory: $1,000-$50,000 (if applicable)
- Security deposits (rent, utilities): 1-3 months rent
- Legal setup (contracts, operating agreement): $500-$2,000
Monthly Operating Costs
Calculate your monthly costs from the categories above, then multiply by 12 for annual projections. Add 10-20% buffer for unexpected expenses.
Frequently Asked Questions
How much does it cost to run a small business per month?
It varies widely: $500-$2,000 for a solo home-based business, $10,000-$30,000 for a small service business with employees, $20,000-$50,000 for retail, and $30,000-$100,000+ for restaurants. Your main costs are rent, payroll, and insurance.
What percentage of revenue should go to expenses?
Healthy small businesses typically spend 60-80% of revenue on expenses, leaving 20-40% as profit before owner compensation. Service businesses often have lower expenses (50-70%), while retail and restaurants run higher (70-90%).
What is the biggest expense for most small businesses?
Payroll is usually the biggest expense—typically 25-50% of total costs for businesses with employees. For solo businesses, it’s often rent/office space or marketing.
How much should I save for taxes?
Set aside 25-30% of your profit for taxes. This covers federal income tax, state income tax (if applicable), and self-employment tax (15.3% for sole proprietors). Pay quarterly estimated taxes to avoid penalties.
How do I reduce small business costs?
Start from home, use free software tiers, outsource instead of hiring full-time employees, negotiate with vendors, bundle insurance policies, automate repetitive tasks, and review expenses quarterly to cancel unused subscriptions.
What insurance does a small business need?
At minimum: general liability ($30-$150/month). Also consider professional liability, workers’ compensation (required if you have employees), commercial property, and commercial auto. A Business Owner’s Policy (BOP) bundles multiple coverages at a discount.
The Bottom Line
The cost to run a small business ranges from $500/month for a solo online business to $100,000+/month for a restaurant. Most small businesses with employees spend $10,000-$30,000 monthly.
Your biggest expenses will be:
- Payroll (if you have employees)
- Rent/facilities (if not home-based)
- Insurance (required for most businesses)
- Marketing (essential for growth)
Start by listing your expected expenses in each category, then add 10-20% for unexpected costs. Review your actual spending monthly and adjust your budget as you learn your true operating costs.
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