How much does it cost to start a startup
Are you ready to launch your startup? Don’t do it before making sure you know with reasonable accuracy how much money you will need to start your business and run it risk-free.
Knowing how much it costs to open a business in Italy today may not be enough: a startup has specific expense items and particular facilities, which require, therefore, further reasoning. To facilitate thinking about how much it costs to open a startup, it is possible to divide the analysis into 4 precise points:
- research expenses preceding the start-up of the business;
- expenses associated with the establishment of the business;
- the expenses that must be incurred in the start-up phase;
- the expenses that must be incurred to keep it going.
Start-up costs: research expenses
You should know right away that in order to be able to fully and accurately answer the question “How much does it cost to open a startup?”, it is necessary for you to also take into consideration the phase that precedes its official establishment. Indeed, the research costs you have to incur before setting up your own business are decisive because the success of your entrepreneurial venture also and especially depends on this phase.
The first basic steps are researching the business model and drafting the business plan, which must take into account all the operating costs that your startup will face in its launch phase. This is a very delicate step, in which you may realize that you need the advice of a team of business plan experts in order to avoid making mistakes that could have serious repercussions on the very survival of your startup.
You must, then, conduct (or commission) the necessary market research to get a clearer idea of the context in which your startup will operate, so that you can then make more informed and effective decisions.
Start-up costs: incorporation expenses
The time has come to get to the heart of the matter: what are the bureaucratic steps and expenses that, today, those who want to set up a startup in Italy have to bear?
In this regard, you should know that the standard bureaucratic process to be followed for the establishment of a startup kicks off with the study and drafting of the articles of incorporation and memorandum of association, and then proceeds with the attribution of the VAT number and tax identification number, the stipulation at a notary public and the subsequent registration in the Companies Registry; in the case of an innovative startup, it is then necessary to proceed with the registration in the special section of the Companies Registry.
Regarding costs, you need to distinguish between opening a startup in the form of an Srl (Limited Liability Company) and in the form of a Srls (Simplified Limited Liability Company). The latter type of company has lower incorporation costs, but the expenses you have to incur afterwards are almost identical, and in addition, Limited Liability Companies are more flexible.
To set up a startup in the form of an Srl you have to budget for a notarial cost varying on average between 1,200 and 1,800 euros (plus 22 percent VAT and minus the 20 percent withholding tax), including the notary’s fee itself and all the taxes and fees necessary to register the articles of incorporation and bylaws.
To the notary’s fee you have to add the cost of the accountant if you have entrusted him or her with the study and preparation of a particular articles of incorporation, the drafting of any shareholders’ agreements, as well as the cost of assigning a VAT number and tax code.
Know that as of Nov. 5, 2022, the models of articles of incorporation of Srls and Srls have come into effect, finally giving completeness to the decree of Dec. 14, 2021; in practice, for Srls and Srls based in Italy with capital paid through cash contributions, the articles of incorporation can be received by the notary by videoconference through a telematic platform prepared and managed by the National Council of Notaries. The deeds of incorporation referring to limited liability companies can be drafted using the “Model Srl”, while the deeds of incorporation referring to limited liability companies under the simplified regime can be drafted using the “Model Srl semplificata”; In case of use of these uniform standard models, the fee for the notary is determined in measures not exceeding half of that provided for in Table C – Notaries of the Decree of the Ministry of Justice July 20, 2012.
To these figures, finally, you must then add the necessary expenses for the mandatory opening of a certified mailbox (about 10 euros plus VAT) and for the digital signature (generally between 25 and 100 euros).
Start-up costs: set-up expenses
Once the startup is established, you enter the operational phase: in order to launch your business towards success you need to incur additional expenses, including those for buying (or renting) and setting up the company headquarters and possible warehouse (in case you do not decide to use the dropshipping option), purchasing software and machinery, creating the website, and all activities related to marketing and advertising, which you can outsource to an external team of marketing plan experts.
Regarding machinery and technology equipment, on the other hand, it should be pointed out that you can also consider renting the resources you need or buying remanufactured tools, so as to lower this particular expense item.
Start-up costs: maintenance expenses
Having the financial resources needed to start a startup is not enough: you must, in fact, also take into account the expenses you need to incur to make it work in the medium to long term.
“Maintenance expenses” include, among others, costs related to employees, suppliers , utilities, maintenance of resources in the technology department, accountant, and taxes. With regard, specifically, to accounting, you should know that that of a startup is, generally, quite ordinary; therefore, the average fee of an accountant for just the basic tasks (such as, for example, VAT settlements, returns, and filing the company’s annual financial statements) can range between 300 and 400 euros per month.
Opening a startup without money: is it possible?
From the analysis just concluded, it will be clear to you that the expenses of starting a startup are many, but you can only know precisely those that relate to the specific stage of startup formation. In the evaluation phase, as well as in the operational phase, always be guided by Benjamin Franklin‘s maxim:
“If you take the money out of your pockets and put it in your head, your head will fill your pockets again”.
To conclude the analysis on how much it costs to open a startup there is, however, one more aspect to clarify: is it possible to open one without money? Or rather: how can you open a startup without money?
If you do not have sufficient economic resources to start the business you have in mind, you can resort to “bootstrapping“: you could, for example, as well as ask the famous FFFs (Family Friends and Fools), create a blog or social page and present your project in a scaled-down version (i.e., minimizing, as much as possible, every item of expenditure) so that you can realize the first revenues and reinvest them by the method of self-financing to grow the business later.
If you lack the minimum capital to start a startup, funding may be the solution: being able to find outside investors willing to finance your business project may be the solution to your problem.
The avenues you can take, in this case, are many. Have you ever heard of, for example, incubators and accelerators? The former intervene when the startup idea is still in its early stages, providing technical support and training; accelerators, on the other hand, provide financial and technical support at a later stage, thus helping to transform the startup into a real company.
Two other possible options are business angels and venture capital: the former are entrepreneurs who, in exchange for a financial return in the medium or long term, invest a portion of their personal capital in your startup project. The second term, on the other hand, refers to funds that specialize in investments.
Crowdfunding has also become very popular in recent years: these are fundraisers (usually online) through which individuals can help finance your startup project in exchange for some immediate or future reward.
The state and other institutions, such as, for example, the regions or the European Union, can also finance your startup project, through public notices or grants competitions. A final option, finally, is to turn to banks or credit institutions to obtain a loan that can cover the amount you identified in the analysis of how much it costs to open a startup today in Italy.