How Much Does It Cost to Start a Small Business in Saudi Arabia?

Starting a small business in Saudi Arabia is an exciting opportunity, especially with the Kingdom’s growing economy and business-friendly environment.

The government has been making it easier to start and run a business, which makes Saudi Arabia a great place for entrepreneurs. With the launch of Saudi Vision 2030, the government has focused on supporting new businesses and creating a welcoming atmosphere for investors.

Many people, both local and from other countries, are interested in starting a business in Saudi Arabia because of its strong economy, strategic location, and growing market. But before you dive in, it’s important to understand the costs that come with starting a business.

This guide will give you a clear picture of how much it costs to start a small business in Saudi Arabia. We’ll break down everything from registration fees to office rental, and digital marketing costs. Whether you are a first-time entrepreneur or looking to expand your business, this blog will help you plan and budget effectively.

A Quick Look at What It Takes to Start a Business in Saudi Arabia

Saudi Arabia offers plenty of opportunities for small businesses. As one of the largest economies in the Middle East, the country is growing quickly and offers many chances to entrepreneurs in sectors like retail, healthcare, and technology.

The Kingdom’s Vision 2030 plan is designed to encourage investment, improve infrastructure, and make it easier to do business.

Thanks to recent reforms, starting a business in Saudi Arabia has become easier than ever. For example, the Saudi Arabian General Investment Authority (SAGIA) now makes it simpler for foreign investors to set up their business without needing a local partner. This makes the process more straightforward and cost-effective for international entrepreneurs.

Moreover, Saudi Arabia has a simple and low-tax system, with no capital gains tax and low corporate taxes. Foreign business owners can now fully own their companies in many industries, reducing financial risks.

Overall, Saudi Arabia is a great place to start a small business. The government is supportive, the economy is stable, and the country is rapidly growing. However, it’s important to understand the costs involved to ensure your business is financially prepared.

Types of Business Entities in Saudi Arabia

When starting a business in Saudi Arabia, you’ll need to choose the right type of company. Each type of business comes with its own set of rules, costs, and perks, so it’s important to choose the one that fits your goals best. Here are the most common types:

Limited Liability Company (LLC):

The LLC is the most common business structure for small businesses in Saudi Arabia.

This type of company limits the owners’ personal responsibility for the business’s debts. Setting up an LLC can cost anywhere from SAR 2,000 to SAR 10,000, not including legal or consulting fees.

The business also needs to have at least SAR 500,000 in starting capital to get off the ground.

Foreign Branch Office:

For international businesses looking to expand to Saudi Arabia, opening a foreign branch office is an option. This allows companies to operate in the country without a local partner.

The cost of setting up a foreign branch can range from SAR 20,000 to SAR 50,000, depending on the business. This covers registration, legal services, and any other required compliance costs.

Sole Proprietorship:

If you plan to run a business on your own, a sole proprietorship might be the best choice.

This structure is easy to set up and cost-effective, with registration fees starting at around SAR 1,000.

However, with a sole proprietorship, you are personally responsible for any debts the business may have.

Freelancer License:

If you’re a freelancer or an independent contractor, Saudi Arabia offers a freelancer visa.

This option allows you to work in fields like design, marketing, and consulting. The cost of getting a freelancer license is typically between SAR 2,000 and SAR 5,000. It’s a low-cost way to start a business without needing a local sponsor.

Choosing the right business type depends on your goals, the nature of your business, and your budget. Make sure to consider all factors before making a decision.

Factors Affecting the Cost of Starting a Business

The cost of starting a small business in Saudi Arabia can vary depending on several factors. Understanding these factors will help you plan your budget and avoid unexpected costs:

Business Location:

The city you choose for your business can affect your costs. Major cities like Riyadh, Jeddah, and Dammam have higher costs for office space, with prices ranging from SAR 50 to SAR 200 per square meter per month. If you’re looking to save money, you can consider smaller cities or even co-working spaces, which are often more affordable.

Type of Business:

The kind of business you want to start also plays a big role in your costs. For example, a retail store or restaurant will have higher initial costs because of inventory, equipment, and staff. Service-based businesses or online businesses tend to be less expensive to start, as they require less physical space and fewer staff.

Permits and Licensing:

Every business in Saudi Arabia must be registered with the Ministry of Commerce and Investment (MCI), which comes with a registration fee. Depending on what kind of business you’re running, you might need a few extra permits to stay compliant.For example, restaurants need a health permit, while tech companies might require an IT license. These extra licenses and permits can add to your overall cost.

Visa Costs:

If you’re not a Saudi citizen, you’ll need to factor in visa costs. For example, a freelancer visa costs between SAR 2,000 and SAR 5,000. If you hire employees from outside Saudi Arabia, you’ll also need to pay for work visas and permits, which will add to your overall expenses.

Office and Operational Costs:

Renting office space, buying equipment, and paying for utilities are all part of the cost of setting up a business. Be sure to account for these ongoing costs as part of your business plan. Also, consider employee salaries, marketing expenses, and insurance.

Costs Breakdown for Starting a Small Business

When starting a small business in Saudi Arabia, it’s crucial to understand the different costs involved. Having a clear idea of what to expect will help you budget effectively and ensure that you’re financially prepared for the journey ahead. Below, we’ll break down the main costs associated with setting up a business:

Initial Registration Costs: 

The first cost you’ll encounter is registering your business with the Ministry of Commerce and Investment (MCI).

This process is essential for obtaining your commercial registration (CR) and trade license. Registration fees usually fall between SAR 2,000 and SAR 10,000, depending on your business’s size and type.

The exact fee will depend on factors like your business activities and the capital invested. While the fee itself might seem small, it’s important to remember that there might also be additional costs for documentation and notarization.

Legal and Administrative Fees: 

Depending on the nature of your business, you may need to hire legal consultants to help with contracts, agreements, and compliance with Saudi laws.

The costs for legal services can range from SAR 1,000 to SAR 5,000 or more, depending on the complexity of your business operations.

Additionally, you might need to cover notary fees, which are required to authenticate official documents. Always factor in these legal costs to avoid any surprises down the line.

Office/Location Setup: 

Another significant cost to consider is setting up your office or commercial space. The price for renting office space varies greatly based on location.

In prime areas like Riyadh or Jeddah, commercial space rental can be expensive, with prices ranging from SAR 50 to SAR 200 per square meter per month.

If you’re working with a limited budget, you can opt for smaller spaces or even co-working spaces, which are often more affordable. Co-working spaces are a great choice for startups, as they typically offer flexible contracts, essential services (like internet and utilities), and networking opportunities.

Visa Costs (For Foreign Investors): 

If you’re a foreign entrepreneur, you’ll need to secure a visa to live and work in Saudi Arabia.

For a freelancer, the visa cost can range from SAR 2,000 to SAR 5,000, depending on the type and duration of the visa.

On top of that, if you hire foreign employees, you’ll need to budget for work permits and residency visas for them as well. This cost will vary depending on the number of staff you hire and the nature of their work.

Zakat, Tax, and Other Financial Considerations: 

Saudi Arabia has a relatively simple tax system compared to many other countries. For most businesses, there is no value-added tax (VAT) on goods and services.

However, businesses must still pay corporate taxes, which generally range from 20% for foreign-owned companies. Additionally, businesses are required to pay Zakat (Islamic charity tax), which is 2.5% of your business’s annual net worth.

It’s important to keep track of these taxes and plan for them in advance, so they don’t come as a surprise when filing.

Operational Costs: 

Operational expenses include things like employee salaries, utilities, insurance, and marketing.

For many small businesses, employee wages are the largest ongoing cost. While salaries vary depending on the industry, a general estimate for hiring staff can range from SAR 3,000 to SAR 10,000 per month per employee, depending on their role and experience.

Additionally, digital marketing costs for running ads on platforms like Google, Facebook, or Instagram can also add up, especially in the early stages of your business when building brand awareness.

All these costs combined create a clear picture of the total investment required to get your small business off the ground. While there are ways to minimize some of these expenses (such as opting for digital marketing instead of traditional marketing or renting a smaller office space), it’s important to budget for all these areas to avoid unexpected financial challenges. By planning ahead, you’ll have a solid financial foundation to build a successful business in Saudi Arabia.

Government Assistance and Funding Options for New Businesses

Starting a small business in Saudi Arabia is supported by various government initiatives designed to ease the financial burden and encourage growth. Here’s a quick look at the available assistance and funding options:

• Government Grants and Subsidies:
  
  • The Saudi government provides grants and support through organizations like Monsha’at (for small and medium businesses) and SIDF (for industrial projects).
    
  • These grants are often aimed at businesses in line with Saudi Vision 2030, including sectors like tech, renewable energy, and tourism.
    
• Saudi Arabian General Investment Authority (SAGIA):
  
  • SAGIA assists foreign investors by helping with licensing, regulations, and market entry.
    
  • Foreign businesses can operate without a local sponsor in certain sectors, making it easier for international entrepreneurs.
    
• Bank Loans and Financial Support:
  
  • Local banks offer loans with low-interest rates and flexible terms for small businesses.
    
  • SAMA (Saudi Arabian Monetary Authority) oversees these loans, ensuring favorable conditions for entrepreneurs.
    
• Private Sector and Venture Capital:
  
  • Saudi venture capital firms are investing in startups, especially in technology, e-commerce, and healthcare.
    
  • These investments can help businesses grow quickly in exchange for equity.
    
• Support for Women Entrepreneurs:
  
  • The government offers financial aid, training, and business incubators for women starting businesses in Saudi Arabia.

Cost of Digital Marketing and Online Business Setup

These days, if your business isn’t online, you’re missing out—having a strong online presence is a must for staying competitive and reaching customers.

Whether you’re a small business offering services or products, setting up a solid online foundation and marketing strategy can make a huge difference in reaching the right audience.

In Saudi Arabia, the costs of starting an online business and investing in digital marketing vary, but understanding these costs helps ensure your budget is well-spent.

• Website Development Costs:
  
  • Your website is usually the first place people go to learn about your business—it’s your chance to make a great first impression. Developing a website in Saudi Arabia can cost anywhere from SAR 5,000 to SAR 30,000, depending on the complexity of the site.
    
  • A simple website may cost on the lower end, while an e-commerce platform or a site with advanced features like booking systems or custom integrations will typically cost more.
    
• SEO (Search Engine Optimization):
  
  • SEO is a powerful way to help people find your website naturally, without paying for ads it brings in the right visitors who are already searching for what you offer. By optimizing your site, you make it easier for potential customers to find you through search engines like Google.
    
  • In Saudi Arabia, businesses typically pay between SAR 2,000 to SAR 10,000 per month for professional SEO services, depending on your business’s competitiveness and industry. SEO helps your website rank higher in search results, making it more visible to your target audience.
    
• Social Media Advertising (Facebook, Instagram, LinkedIn):
  
  • Social media platforms like Facebook, Instagram, and LinkedIn allow you to target your ads to specific audiences based on interests, location, and behavior. This targeted approach is a great way to engage your audience and drive conversions.
    
  • The cost of running ads can range from SAR 1,000 to SAR 20,000 per month, depending on your marketing goals, the audience you want to reach, and the competition in your industry.
    
• Google Ads:
  • Google Ads is another great way to get more eyes on your website, helping you reach people who are actively looking for what you offer. The cost of running Google Ads campaigns varies based on factors like your industry, target keywords, and the level of competition.
    
  • Small businesses can expect to spend around SAR 2,000 to SAR 15,000 per month for Google Ads, depending on the scale and goals of your campaigns.

Unexpected Costs to Look Out for When Starting Your Small Business

Starting a business in Saudi Arabia is an exciting venture, but many entrepreneurs overlook certain hidden costs that can arise during the process. While you may have a good handle on expected expenses like registration fees, office space, and marketing, there are several other costs that can surprise you. Here’s a closer look at some of these hidden expenses that you should keep in mind when starting your small business in Saudi Arabia.

• Legal and Compliance Costs:
  
  • Ensuring that your business is legally compliant is essential, but it can also come with unexpected costs. You might need legal services for drafting contracts, creating agreements, and handling other paperwork. Legal fees can cost anywhere from SAR 2,000 to SAR 5,000, depending on how simple or complex your business setup is.
    
  • In some cases, businesses may also need to hire a local sponsor, which could cost anywhere from SAR 10,000 to SAR 25,000 annually, depending on the business type.
    
• Insurance Costs:
  
  • Depending on the nature of your business, you may need insurance coverage, which could be a mandatory requirement. Businesses in industries like retail, healthcare, or construction often need specific insurance for employees or operations. Even if it’s not required, it’s always a good idea to protect your business. The cost of insurance can range from SAR 1,000 to SAR 10,000 annually, based on the coverage you choose.
    
• Unexpected Operational Costs:
  
  • Even after budgeting for fixed expenses like rent, salaries, and utilities, unexpected operational costs can pop up. Examples include equipment breakdowns, supply chain delays, or maintenance costs for office space. To cover such unexpected expenses, it’s wise to set aside an emergency fund of 5-10% of your initial budget.
    
• Marketing and Branding Costs:
  
  • Many business owners focus on website development and online ads but forget about ongoing branding costs. This includes designing logos, creating business cards, or developing content for your website and social media. Regularly refreshing your marketing materials can cost between SAR 3,000 to SAR 10,000 annually, depending on the scope of your campaigns.
    
• Employee Training and Development:
  
  • Hiring staff is just the first step. Ensuring your employees are trained and stay updated in their roles requires investment in training programs.Training costs can run between SAR 1,000 to SAR 5,000 for each employee, depending on what kind of training they need.

 Employee Costs: Understanding Hiring and Labor Expenses

Hiring the right team is essential to the success of your business, but it’s important to keep in mind that hiring employees in Saudi Arabia comes with several costs beyond just salaries.

Understanding the full scope of employee expenses will help you plan effectively and avoid unexpected financial strains. Here’s what you need to know about employee costs when starting a business in Saudi Arabia:

• Salaries:
  
  • Employee wages are one of the biggest ongoing expenses for most businesses. The salary range depends on the industry, experience level, and role of each employee. For example, a junior employee might earn between SAR 3,000 to SAR 5,000 per month, while more experienced professionals or managers can earn anywhere from SAR 8,000 to SAR 15,000 per month.
    
  • If you’re planning to hire skilled professionals or specialized workers, be prepared for higher salary costs.
    
• Work Permits and Visas:
  
  • If you plan to hire foreign employees, you’ll need to cover the costs of work permits and visas. In Saudi Arabia, the cost of hiring a foreign worker can range from SAR 2,000 to SAR 5,000 per visa depending on the employee’s role and the duration of their employment. Additionally, each foreign worker will need a residency permit, which comes with its own fees.
    
• Saudi Nationals and Nitaqat Program:
  
  • Saudi Arabia’s Nitaqat Program is a government effort that pushes companies to prioritize hiring Saudi nationals by setting local employment targets for businesses. Depending on your company’s industry and size, you may be required to employ a certain percentage of Saudi nationals. While the government offers incentives to businesses that hire Saudis, there may also be higher salary expectations for local hires. The cost of hiring Saudi nationals can range from SAR 4,000 to SAR 12,000 per month based on their experience and skills.
    
• Employee Benefits:
  
  • Beyond salaries, businesses must also consider employee benefits such as health insurance (which is mandatory for all employees), annual leave, and end-of-service benefits. These benefits can add another 10-20% to the total cost of an employee.

How to Keep Costs Low When Starting Your Business in Saudi Arabia

Starting a business is thrilling, but it can also come with some hefty costs. Thankfully, there are ways to keep costs down while still building a solid foundation for your company. Here are some easy-to-follow tips to help you minimize costs as you start your business in Saudi Arabia:

• Start Small and Grow Gradually:
  
  • One of the best ways to save money is by not going all out in the beginning. You don’t need a huge office or a large team right away. Instead, try working from a co-working space or even from home. It’s much cheaper, and you’ll have fewer overheads in the beginning. As your business grows and you begin to see profits, you can slowly expand to a bigger space and hire more staff.
    
• Embrace Technology to Save Time and Money:
  
  • Technology can be your best friend when you’re starting a business. Using cloud-based software for things like accounting, communication, and project management means you don’t need to spend money on physical office equipment or big software packages. There are also tons of affordable tools for small businesses, making it easier to run things smoothly with fewer resources.
    
• Take Advantage of Government Support:
  
  • The Saudi government is super supportive of small businesses and startups, offering various programs, incentives, and grants to help entrepreneurs. The Saudi Arabian General Investment Authority (SAGIA) offers assistance for foreign investors, while Monsha’at, the Small and Medium Enterprises Authority, provides financial aid and training. Make sure to check out these programs as they can give your business a much-needed boost without breaking the bank.
    
• Negotiate for Better Deals:
  
  • Never underestimate the power of a good negotiation. Whether you’re renting office space, buying equipment, or hiring services, always ask for discounts or better terms. Consider renting office space in a less expensive area if you don’t need a prime location at first. Every little saving adds up in the long run.
    
• Go Digital for Marketing:
  
  • Traditional marketing can be expensive, but luckily there are more affordable alternatives. Use digital marketing strategies like social media ads, SEO, and content marketing to get the word out about your business. You can also hire freelancers or small agencies to handle your digital marketing, which can save you money compared to hiring a full-time marketing team.
    
• Build Good Relationships with Suppliers:
  
  • Building strong relationships with suppliers and business partners can help you secure better prices and payment terms. If you’re a loyal customer, don’t be afraid to ask for discounts or flexible payment options. This can help you manage your cash flow more effectively and keep costs under control.

Success Stories of Small Businesses That Thrived in Saudi Arabia

Starting a business in Saudi Arabia may seem daunting, but many entrepreneurs have proven that with the right approach, passion, and persistence, success is within reach.

From cozy cafés to innovative tech startups, the Kingdom has witnessed a wave of small businesses that have not only survived but thrived. Here are a few inspiring success stories that show what’s possible with dedication, creativity, and a strategic mindset:

1. A Local Café That Became a Community Favorite

• Mariam had always dreamed of owning a café that served the best coffee in Riyadh. With limited capital, she started small by renting a modest space in a residential neighborhood. Instead of spending heavily on advertising, Mariam focused on creating a cozy atmosphere, offering quality coffee, and building a loyal customer base through word of mouth. She used Instagram to share behind-the-scenes content and customer stories, which attracted more foot traffic. Within months, her café became a beloved spot for locals.

2. A Tech Start-Up That Got Government Support

• Ahmed, a software engineer, saw a gap in the Saudi e-commerce market and created an app designed to help small businesses streamline their online stores. With limited funds, he turned to the Monsha’at program, which offers support for small businesses and startups in Saudi Arabia. The government’s assistance allowed him to hire a small team and grow his project. Today, his app is widely used by local businesses across the Kingdom, helping him scale quickly and sustainably.

3. E-Commerce Business That Took the Digital Route

• Fatimah dreamed of sharing her passion for traditional Saudi clothing with the world, but the high costs of running a physical store made it feel out of reach. She launched an online boutique selling custom-made abayas and traditional garments. Using platforms like Shopify, Google Ads, and Instagram, she marketed her products to a global audience. Within a year, her e-commerce business generated enough income to open a physical storefront in Riyadh. Her success highlights the power of digital marketing and e-commerce platforms in launching low-cost businesses in Saudi Arabia.
  

Legal Requirements to Start a Small Business in Saudi Arabia

Starting a small business in Saudi Arabia requires meeting several legal requirements to ensure your business is properly registered and compliant with local regulations. Here’s a simple breakdown of what you need to know:

1. Choose the Right Business Structure

Before anything else, decide on the legal form of your business. In Saudi Arabia, common options include a Limited Liability Company (LLC) for small businesses, a sole proprietorship, or a joint stock company.

An LLC is popular because it offers limited liability for its owners and can be fully owned by foreign investors in many sectors. However, some industries might require a local partner, so make sure to check the specific rules for your business type.

2. Obtain Business Licenses

You’ll need to obtain a few essential licenses before you start operating:

• Commercial Registration (CR): This is required for all businesses. It’s issued by the Ministry of Commerce and is the official document that allows you to legally operate in the country.
  
• Investment License (for foreigners): If you’re a foreign investor, you’ll need an investment license from the Ministry of Investment (MISA). This gives you permission to run your business in Saudi Arabia.
  

3. Open a Business Bank Account

Once you have your business registration, you’ll need to open a corporate bank account. This is essential for managing your finances and paying taxes. Banks will typically require your Commercial Registration (CR) and other company documents to set up the account.

4. Register with Relevant Authorities

Make sure your business is properly registered with key government bodies:

• General Organization for Social Insurance (GOSI): This ensures you comply with employee social security and insurance requirements.
  
• General Authority of Zakat and Tax (GAZT): Register for taxes, including VAT if your business qualifies.
  
• Chamber of Commerce: Being registered with the Chamber gives your business credibility and access to networking opportunities.
  

5. Follow Saudization Guidelines

Saudi Arabia has a policy known as “Saudization,” which requires companies to hire a certain percentage of Saudi nationals. This is important for compliance and can also provide you with access to government support programs.

6. Set Up Proper Accounting and Tax Systems

Having an organized accounting system is not just good business practice—it’s a legal requirement. Make sure to keep accurate records, especially for tax purposes, to avoid any legal issues later on.

Starting a small business in Saudi Arabia involves various costs that must be carefully planned for to ensure success. These costs include legal registration, licenses, office space, employee salaries, and equipment. While the expenses may vary depending on the type of business, knowing what to expect will help you make better financial decisions and avoid any surprises along the way.

Despite the upfront costs, Saudi Arabia presents a wealth of opportunities for small business owners. With a well-structured plan and an understanding of the legal and financial landscape, you can establish a thriving business in a market that’s ripe for growth.

At Local City Solutions, a digital marketing agency based in Saudi Arabia, we specialize in helping businesses navigate the local market, optimize their digital presence, and ensure sustainable growth. Let us help you turn your business vision into a reality start your journey today!