Startup costs and working capital: how much cash do you need?

Separate three kinds of cash need

1. Before opening: equipment, fit-out, deposits, initial stock, professional work, permits, recruiting and launch costs.
2. While getting established: cash paid before customer receipts catch up—payroll, rent, suppliers, debt payments and owner living needs funded by the business.
3. A remaining cushion: cash you intend to retain for uncertainty after covering the modeled shortfall. It is a chosen buffer, not a guarantee.

The SBA’s planning guidance distinguishes one-time and recurring expenses. The schedule below goes further by showing when cash is collected and paid. A profitable month can still require funding if customers pay later.

A worked opening-and-ramp example

All figures are illustrative USD assumptions. This is a four-month teaching schedule, not a complete business plan. There is no borrowing. Monthly cash costs include a $3,000 owner-work allowance; taxes and major replacement purchases are not modeled.

With $80,000 available and $65,000 spent before opening, the business begins with $15,000 in cash.

The largest cumulative operating shortfall is $17,000. Opening uses of $65,000 + that shortfall + a chosen $5,000 cushion require $87,000. Against $80,000 available, the funding gap is $7,000.

The negative position in month three means the plan runs out of cash. It is not an assumed overdraft or a hidden equity contribution. The month-four recovery does not fund bills due in month three.

Turn this into your funding worksheet

1. List each opening line with a quote or an explicitly unquoted allowance, payment date, tax treatment and inclusions.
2. Forecast cash receipts, not just invoiced sales. Add payment delays, deposits and platform payout timing where relevant.
3. Schedule supplier payments, wages, rent, debt principal and interest, inventory purchases and capital replacements.
4. Show the lowest cash balance and the additional money needed to keep it above your chosen reserve.
5. Separate committed funding from possible funding. A loan application is not cash available to spend.
6. Extend the schedule through seasonality and major renewal/replacement dates; four months is not enough for an actual investment decision.

Avoid counting the same cash twice

Initial stock belongs in the opening uses if paid before launch. When it sells, cost of goods sold affects profit, but the original purchase is not paid again. Reorders are new cash payments. Similarly, a refundable lease deposit is cash tied up, even though it is not an ordinary rent expense.

Debt principal uses cash but is not an operating expense. Loan proceeds and new equity finance the business; they are not customer revenue. Separate your household reserve from the amount genuinely available for the business.

What to test before committing

Move opening back, reduce early sales, delay collections and increase the largest uncertain cost. Recalculate the cash low point for each case. Avoid simply multiplying a national startup range by a city factor: installation, wages, rent and utility tariffs have different drivers.

Keep the assumptions editable and retain their source dates. A contingency cannot substitute for investigating a material unknown such as whether a property has adequate electrical service.

Apply this to a business you are considering

A few plain-language answers give you a starting point. Financial and research support varies by business, format and country; the planner explains the available scope.

Continue planning

Sources and example scope

1. SBA: Plan your business

   Calculate your startup costs; Break-even point; Buy an existing business or franchise. U.S. planning framework, not evidence for the example prices or demand. Accessed 2026-10-29; publication dates vary by source.

Examples and calculations are Meridian teaching scenarios with explicit assumptions, not reported business results, lending terms or tax advice. U.S. sources do not establish requirements in another country. Research and calculation methodology.