How Much Does It Cost to Start an Online Business?

Costs of starting an online business

Starting an online business is easy and affordable. Here are some expenses you can expect to encounter:

Business license

To operate a business, you may be required to obtain a business license or permit. The cost depends on the type of business license you need and the location of your company; each state has different fees.

A business license can cost anywhere from $50 to a few hundred dollars, plus annual renewal fees. If you operate in certain regulated industries — such as agriculture, mining, or transportation — you’ll also need a federal business license or permit.

Web hosting

You’ll need a web hosting service and a domain name, which is typically your business website’s URL. You’ll pay an initial registration fee of roughly $10 to $20 for a domain name and then an annual renewal fee in a similar range, depending on the registrar and domain extension you choose.

Web hosting costs depend on how large your company is and how much traffic you anticipate. Are you expecting a generous amount of traffic to your site every day? Then you’ll need to pay a bit more to have a platform that can host a large number of visitors.

You can pay annually or monthly. Shared hosting plans — a common starting point for new online businesses — typically run $3 to $10 per month, while managed or dedicated hosting for higher-traffic sites can cost $100 or more per month. Many providers offer discounted rates when you commit to an annual plan.

Web design and responsiveness

Customers must be able to easily access and navigate your website on their phones. Plus, you’ll rank higher in Google search results if your website is mobile-friendly. So, make sure your website platform includes mobile responsiveness in the costs.

If you have specific branding standards to follow, you’ll also need to pay for custom web design. Hire a professional who uses your brand colors and fonts to design your website’s homepage, menu and other content.

These costs can vary — you could pay as little as a few hundred dollars or as much as several thousand dollars for a fully custom website design. If you don’t have strict brand standards to follow, many website builders offer free or low-cost themes that make it easy to get a polished site up and running without hiring a designer.

E-commerce platform

An e-commerce platform is a software application that helps business owners create an online store, accept payments for products and manage inventory. Many are cloud-based and charge monthly for their services. The cost of e-commerce software typically ranges from $29 to $299 a month, depending on the features and tools you need, though enterprise-tier plans can run significantly higher.

Payment processing

A payment processor makes sure you get paid for your online sales. How much you’ll pay to accept credit and debit cards varies depending on the type of card. It also depends on the amount of the sale, whether the card is present and which processor you hire. [Read related article: The Best Credit Card Processors of 2025]

Visa and Mastercard typically charge interchange rates that range from around 1.5 to 2.5 percent per transaction depending on the card type and merchant category, while American Express charges approximately 1.6 to 3.5 percent. The payment processor then adds its own fee on top — known as the markup — which varies by provider and can sometimes be negotiated based on your monthly sales volume.

Inventory

Whether you operate a physical store or sell only online, you’ll have to stock inventory. The costs to store, maintain and replenish it make up your inventory expenses.

Typically, inventory costs are calculated as a percentage of the inventory’s value. Known as the carrying costs, they can represent as much as a third of the value of your inventory. For e-commerce operators, inventory tends to be the most valuable asset and the largest cost.

Dropshipping

Business owners who don’t want to keep inventory on hand can adopt a dropshipping model. Dropshippers don’t have any inventory or don’t purchase the products they are selling until they have a sale.

But there are still costs associated with this type of selling, and they are dictated by the sales platform you use. Whether it’s eBay, Amazon, Walmart or Etsy, you’ll have to pay listing fees and a percentage of the sale. Those fees can add up quickly, so it’s worth calculating your true take-home before committing to a platform.

Marketing

Marketing is one of the most important things you can spend money on, because it has a direct payoff if you do it well. You’ll need to budget for expenses such as search engine optimization (SEO), pay-per-click (PPC) ads, social media and content creation.

“When it comes to starting an online business, the biggest costs often revolve around three key areas — your platform, your branding and your marketing,” said Phil Portman, founder and CEO of Textdrip. “For most online businesses, this means spending on website development or e-commerce platforms, securing a domain name and setting up hosting services. Add in some must-haves like logo design, content creation and email marketing tools, and you’ll see these costs can add up quickly.”

Why do you need to pay for SEO? For starters, so that customers know you exist! Do you want to ensure that your site ranks highly in organic search results? Then you may want to hire an SEO agency to help you build backlinks and further optimize the content on your site.

You can expect to pay several thousand dollars to set up your SEO marketing with an agency and then at least several hundred each month to maintain ongoing results, depending on the scope of services and the size of your business.

PPC marketing

Many online brands and businesses also choose to employ PPC marketing. With this option, site owners pay a fee based on the keywords they want to rank for and how many clicks they receive to their site.

Your ads will appear on potential customers’ screens — for example, as a sponsored link at the top of search results or a targeted ad in their social media feed. If they click it, you pay a fee. This is a proven way to drive traffic, but costs vary depending on your industry and goals. You could spend as little as $100 per month or as much as $10,000 or more per month.

Web content creation

If you’re not an experienced content writer, you should hire a freelancer to take care of your web content creation. Google and other search engines prioritize sites with well-written, quality content.

If your homepage is full of errors or offers a poor user experience, your search rankings will suffer. Hiring a skilled copywriter helps ensure that your homepage, subpages and any blog posts feature quality content that makes it easy for users to find what they need.

Social media

You should also hire a professional to engage your audience on social media. Just because you have a personal Instagram account doesn’t mean you know how to run a business’s Instagram account.

You’ll need someone to maintain all of your social media platforms, create content, monitor reviews and comments, and make sure everything runs smoothly. Chances are, you don’t have the time or bandwidth to do all of that and run your business.

Just hire a freelancer who knows how the world of social media works; then, sit back, relax and watch your follower count grow.

How to save money when starting an online business

If you’re in the early stages of starting a business, you’ve probably found that reality doesn’t always match your expectations. Most new entrepreneurs discover they spend more money and earn less in those first few years than they originally anticipated.

Here are some ways you can save money during the early stages of growing your business:

• Start small: The first iteration of your business may not look like your long-term vision. Your ultimate goal may be to run an online clothing store, but that takes a lot of capital to create. You may want to get started with just one product line, get customer feedback and improve upon your idea. Over time, you can continue to grow your business and add other lines.
• Take advantage of free tools: Software costs can quickly add up. So, it’s a good idea to take advantage of as many free tools as possible. Figure out which ones you actually need to spend money on, and look for ways to save on the rest. “In total, you can get your online business up and running for under $300 if you do it right,” said Benjamin Talin, CEO and founder at MoreThanDigital. “Tools like Canva and the free version of ChatGPT make it easy to create marketing materials, and setting up a presence on major social media channels ensures you’re reaching your audience.”
• Focus on what matters: Beth Worthy, president at GMR Transcription, recommended businesses focus their resources on what matters most in the beginning. “Investing in a simple but professional website and concentrating on organic marketing like SEO and customer referrals allowed us to manage initial costs. Avoiding unnecessary expenses and scaling gradually helped us grow sustainably while upholding our quality promise.”
• Focus on growing your email list: Before you begin thinking about spending money on advertising, focus on growing your email list. You can do this via social media, your blog and other free marketing tools.
• Partner with other companies: Look for complementary brands you can partner with in the early stages of growing your business. Cross-promotion benefits both companies and won’t cost either business any money.
  

Jamie Johnson and Donna Fuscaldo contributed to the reporting and writing in this article. Source interviews were conducted for a previous version of this article.