Startup Costs (for the 4 Most Common Types of Online Businesses)

Online business startup costs typically range anywhere from $100–$60,000 or more, but here's what most people miss: The type of business you choose matters way more than any single expense. A service-based business might cost you less than $1,000 to launch, while an e-commerce store with inventory can easily push your initial investment past the $20,000 mark. The good news is that you don’t need to drain your entire savings account to get started.

1. Service-Based Online Business

Service-based businesses, which include popular options like freelance writing, consulting, virtual assistance, web design, or coaching, consistently have the lowest startup costs of any online business model available today. This financial advantage exists because you’re basically selling your existing skills and time rather than buying, storing, and selling physical products. Since there’s no inventory to be purchased, no warehouse space to rent, and no complicated shipping logistics to figure out, the barrier to entry is extremely low. This model is perfect for absolute beginners who’d prefer to test the market for their skills without risking thousands of dollars in capital.

Essential startup costs:

The essential costs to get a service business up and running are minimal. You’ll need a domain name (about $10–$20 a year) and basic shared web hosting (roughly $24–$120 a year). You can set up your site using a platform like WordPress, Wix, or Squarespace, with costs ranging from free (if you use a basic plan) up to $30 a month.

Branding like logos and digital business cards can be done for free if you take the time to DIY them on Canva. You’ll also need payment processor accounts like Stripe or PayPal, which are usually free to set up, but you should expect to pay standard transaction fees of about 2.5%–3.5% per sale.

Optional costs might include a professional email address for around $6 a month or scheduling software for $10–$15 monthly. If you’re starting completely from scratch and need to buy equipment, you might add $500–$1,500 to your budget for a reliable laptop, a quality microphone for calls, and a decent webcam.

Total estimated startup cost for a service-based business: $300–$2,000, or potentially as low as $100 if you already own the equipment and commit to using free software tools.

2. Dropshipping Business

The dropshipping business model sits in the middle of the cost spectrum. In this setup, you’re running a fully functional e-commerce store, but you never actually handle or hold the inventory; instead, your supplier manages all the storage and shipping for you. When a customer puts in an order on your website, you just forward that order to the supplier, who then ships the product directly to that customer. This arrangement means significantly lower upfront costs compared to traditional retail, but you’re still operating a real retail store with its own set of necessary expenses.

This model is perfect if you’re selling physical products but don’t want to make the massive financial investment of buying bulk inventory upfront. Your money will mostly be spent on building a professional-looking online storefront, successfully driving traffic to the store, and thoroughly testing different products to see what sells best.

Essential startup costs:

Essential costs for a dropshipping business include the domain name and hosting (around $50–$150 a year) and a dedicated e-commerce platform like Shopify or BigCommerce (typically $30–$299 a month). You’ll suffer payment processing fees of 2.5%–3.5% per transaction on top of needing to budget about $200 to $1,000 for purchasing initial product samples and testing them out.

Your major expense for this model is marketing, where you should plan on spending a minimum of $500–$2,000 a month on paid traffic through platforms like Facebook Ads, Google Ads, or TikTok. You’ll also need to budget $50–$100 a month for vital apps and plugins like email marketing and analytics, and another $200–$500 for content creation like product photos and videos. If you don’t think you’ll be able to handle the daily ins and outs like customer service on your own, you’ll need to opt for a virtual assistant at $300–$500 a month.

Here’s the reality: Most dropshipping businesses aren’t profitable in the first month. You need a dedicated marketing budget to systematically test products and find what connects with customers, meaning you should plan for at least three months’ worth of operating costs.

Total estimated startup cost for a dropshipping business: $2,000–$5,000 to cover those first three months of operation.

3. E-Commerce Stores with Inventory

Operating an e-commerce business where you buy, store, and ship your own inventory is the most expensive online business model, and for good reason. In this model, you’re paying for products upfront, funding storage or warehousing solutions, actively managing the logistics, and handling all customer returns yourself. The costs add up quickly, but the major trade-off for this high investment is securing significantly higher profit margins and gaining complete control over your brand image, product quality, and the overall customer experience.

This system is perfect if you’re fully committed to building a scalable, serious brand and you have the capital ready to invest right away. It’s also the better choice for people who want full control over every detail, including product quality checks, customized packaging, and the speed of shipping.

The reason this model is so expensive is simple: You’re paying for the inventory before you make a single sale. If you decide to stock 500 units of a product at $10 each, that’s $5,000 tied up in products that are sitting in storage. Once you factor in costs for shipping, warehousing, and packaging materials, the expenses spiral quickly.

Essential startup costs:

Key startup costs include a domain and hosting ($50–$150 a year) and your e-commerce platform ($30–$299 a month). If you’re going to hire a professional to whip up your website, that’ll set you back anywhere from $2,000–$10,000; you can always opt to DIY with templates for only $500–$2,000.

An initial inventory purchase will cost between $5,000 and $30,000 or more depending on the product type and quantity. You’ll also need to budget for storage ($0 if working from home, or up to $1,000 a month for warehouse space), shipping materials ($500–$2,000), business or product liability insurance ($500–$2,000), and a significant marketing budget of $1,000–$5,000 per month. Don’t forget to purchase management software for all of that inventory, so add on another $50–$300 a month, and keep a 5–10% buffer budget for returns and refunds.

Total estimated startup cost for an e-commerce store with inventory: $10,000–$50,000, depending on your product category and the volume of initial stock you purchase. 

4. Affiliate Marketing Business

Affiliate marketing is one of the cheapest business models you can start online because it completely eliminates the need for you to create products, manage inventory, or handle any shipping logistics. Your role is to promote the products of other companies and earn a commission on every sale made through your unique referral link. Since the product owner manages the entire operational side of the business, your  job is simply to drive targeted traffic and make recommendations.

This hands-off system makes affiliate marketing the prime entry point for beginners who want to start making money online without any massive upfront investment. You can start with a blog, a YouTube channel, or even just social media accounts.

Essential startup costs:

Essential costs are low: You’ll need a domain name and hosting ($50–$150 a year) if you decide to build a site, and a website or blog setup can cost just $0–$30 monthly. Content creation tools can sometimes come for free, or up to $50 monthly for basic video software and graphic design tools like Canva. And although optional, I highly recommend basic SEO tools like Ubersuggest or SEMrush, and they’ll cost just $0–$100 a month depending on the plan you opt for. 

For marketing, choose a starter plan for an email marketing platform at $0–$20 per month to keep costs low while you’re laying down the foundation of your business. If you want to test any products before recommending them, budget for an optional $50–$300.

A great money-saving hack here is realizing you don't even need a website to start; there are plenty of successful affiliate marketers who promote exclusively through free platforms like Instagram, TikTok, YouTube, or Pinterest. By building an audience on social media and sharing your links, you can start earning much faster with virtually zero upfront costs.

Total estimated startup cost for an affiliate marketing business: $300–$2,000 if you build a website, or as low as $0–$300 if you stick to social media platforms.

5 Smart Ways to Slash Your Startup Costs

Starting a business doesn’t have to drain your savings. Here are five practical strategies that keep your costs low while you validate your idea and build real momentum.

Start with the essentials, scale when you're profitable

The biggest mistake new business owners make is buying every tool, app subscription, and expensive upgrade right from the start. Instead, start with the bare minimum: your domain name, basic hosting, and a simple website.

Once you’re making consistent sales and bringing in revenue, you can wisely reinvest your profits into premium tools, better professional design, and paid advertising campaigns. Avoid blowing your limited budget on fancy features and complex software that you won't actually need or use in the first few months of operation.

Leverage free tools and platforms

There’s no reason to pay for expensive software on day one when many high-quality, free alternatives already exist. Use free versions of tools like Canva for all your graphic design needs, Google Workspace for your business email and documents, and rely on free social media platforms to promote your business. There are even services like Buffer and Mailchimp that offer free starter plans for managing social media scheduling and email marketing.

Only commit to paid tools when your business has grown enough to genuinely need all of those advanced features.

Start with dropshipping before committing to inventory

If your dream is to run an e-commerce store but you just don’t have $20,000 sitting around, the smart move is to start with dropshipping. This allows you to test out different products, learn what items customers are willing to buy, and build your initial audience without risking your finances. Once you’ve validated your product idea and are consistently making profits, then you can transition to holding your own inventory for better profit margins and much faster shipping.

DIY what you can, outsource what you can't

Learn how to do basic tasks yourself by utilizing the cornucopia of free resources and tutorials available on sites like YouTube. These tasks include basic website building, content creation, and day-to-day social media management. You should only outsource specialized, high-skill tasks (professional logo design, complex website features, or paid ad campaigns) when it becomes absolutely necessary. Remember that your time is valuable, but so is your cash, so you need to find a sustainable balance between the two.

Choose platforms that do multiple jobs

Stop paying for five different tools when one integrated platform can simultaneously handle your email marketing, social media scheduling, analytics tracking, and customer management. All-in-one platforms like HubSpot (which offers a free CRM), Systeme.io (for landing pages and email marketing), or Shopify (which combines the store with marketing tools) save you significant money and simplify your operational workflow. Fewer monthly subscriptions means more cash left in your pocket.

Your Online Business is the Best Investment You'll Ever Make… But It Doesn't Have to Drain Your Wallet

Here’s the bottom line: Starting your own online business might be the best investment you ever make, especially if it brings in consistent income and actively builds long-term wealth. More importantly, however, it shouldn’t cost you $50,000 on the first day. The smartest approach is to start small, choose a business model that comfortably fits your current budget, and plan to scale your operations as you grow. If the process of launching your business completely drains your savings and stresses you out before you’ve even secured your first sale, you’re doing it wrong.

Build smart, spend strategically, and focus on generating revenue fast. The businesses that ultimately succeed aren’t always the ones with the biggest budgets; they’re the ones that start lean, learn quickly from their mistakes, and reinvest their profits back into growth.