Jul 20, 2025
Small businesses are at the core of the American Dream, but that doesn’t mean every single one of those golden business ideas should become a reality.
That’s what finance guru Dave Ramsey said on his show during a conversation with Caleb, a caller from Chicago who wanted advice on getting a down payment to start a new venture.
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Caleb’s business dream? Buying a fishing lodge in Canada. He said he’d never run a business before but loved to fish and hunt, and that he thought he could get $100,000 for a down payment on a lodge and run the venture for about half the year.
He also told Ramsey that he talked to a few fishing lodge owners he knew who didn't own a business before buying their lodges, but Ramsey wasn’t having any of it. When Ramsey learned Caleb had never run a business, let alone worked in the fishing or hospitality industry, Ramsey had a blunt assessment.
“You are about 90% dream and about 10% reality,” said Ramsey.
And when asked about his business plan after getting the fishing lodge, Caleb’s response was that many lodges are owned by seniors who don’t know how to market their property. Caleb thinks he would be able to promote the lodge easily, but Ramsey wasn’t buying it.
“There are three rules of business: it’s gonna take twice as long as you think, it’s gonna cost twice as much as you think, and you’re not the exception,” said Ramsey. “I’m not trying to be a dream killer, I love killing nightmares though.”
The costs of running a small business
Those three rules of business are lessons that Ramsey has uttered before.
So many business dreamers think they have a great plan at the start, going as far as investing funds or taking out loans before realizing they’ve gone into debt for an idea that isn’t landing with the target audience. In fact, more than 1 in 5 businesses in the U.S. fail during their first year.
The dream of owning a business keeps America’s free enterprise economy going, but sometimes those dreams can cloud the true costs of running a small business. New small businesses cost an average of $40,000 in their first year, including hiring staff, producing goods, getting inventory and securing a physical location.
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But those costs can vary wildly: for example, an online startup could cost as little as $100, while opening a restaurant could cost up to $750,000.
Hiring staff can be one of the most expensive aspects of running your own shop. Adding an employee to payroll could cost you anywhere from $4,000 to $20,000, and that doesn’t include salary or benefits costs. According to the U.S. Small Business Administration, total employee costs — including their wages, benefits and taxes — could amount to 1.25 to 1.4 times their actual salary.
And you can count on putting at least some of your savings into a new business. The Kauffman Foundation reports that nearly two-thirds of small business owners have to dip into their personal or family savings to fund their venture. It's also worth noting that in 2023, 71% of small business owners were in debt.
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What to consider before starting a small business
Deciding to start a small business requires thorough planning, financial smarts and self-honesty, as your idea may not work out the first time around. Let’s break down the steps to take and things to consider before you open up shop.
For starters, consider all your startup costs. These include any licenses and permits you might need, legal fees, equipment and inventory goods, marketing and promotional costs, and storefront deposits.
Next, try to predict your ongoing or operational costs, such as your monthly rent, employee wages, inventory restocking, ongoing marketing, taxes and storefront maintenance. Don’t forget to account for any “hidden” costs, such as shrink, card processing fees or slow sales months. Talk extensively with other business owners in your industry and don’t be afraid to ask them about how much they make, or where they might have gone wrong.
Analyze industry trends and risks associated with your product or service and consider surveying potential customers. Finally, create both best- and worst-case financial projections, especially for that first vulnerable year of business.
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Chris Clark is a Kansas City–based freelance contributor for Moneywise, where he writes about the real financial choices facing everyday Americans—from saving for retirement to navigating housing and debt.
