How much does it cost to start a business?

Business set-up costs vary widely from one business to the next, but the smallest businesses on a budget cost just a few hundred pounds to set up. Below we’ll run through some typical starting business costs that you might incur in the first year, to help you plan your budget. Good luck on your new venture!

How much does it cost to register a business?

It only costs £12 to register a business yourself at Companies House. However, many small business owners prefer to engage the help of an agent such as Companies Made Simple to register their business.

The benefits of this are that different packages can provide (in addition to company registration) customer support to call with questions, getting a registered address to use for business purposes to protect your home address, maintenance of statutory books, and more. Some even offer cashback if you open a bank account through them. For comparison’s sake, these types of services cost in the range of £13.99 to £99.99 + VAT.

How much does business liability insurance cost?               

The business insurance cost for a small business can start from around £85 a year for public liability, £60 per person for employers’ liability, and £50 for professional indemnity. But those are low-end costs for a small business that doesn’t present a lot of risk to an insurer. For example, a tutoring business will have low public liability costs, but a construction company will pay many multiples of this due to the dangers of the industry (e.g. dangerous worksites, sharp tools, etc.).

The riskier a business, the more money they’ll have to set aside to pay higher premiums.

Most businesses need insurance in one form or another. As small businesses don’t have a lot of extra money in the early days, insurance can feel expensive. But it’s critical financial protection if something goes wrong, such as a liability claim against your business.

Public liability is one of the most common types of small business insurance. It protects against claims of injury or damage made by third parties, and it covers both legal defence costs and compensation payments. For example, if a visitor to your business slips on a wet floor and falls, injuring themselves, they could sue.

For many types of businesses, professional indemnity (PI) insurance is also a critical form of insurance. This protects against clients who claim that you’ve caused them a financial loss due to professional negligence or a mistake. Architects, accountants, consultants, PR professionals, and really anyone else giving advice, designs, or a professional service should consider PI insurance.

Businesses with any employees are legally required to buy employers’ liability (EL) insurance. This includes temporary or casual workers, too. A business that is meant to have EL insurance but doesn’t can be fined up to £2,500 a day.

Recruitment costs

If you need to hire staff for your business, it’s possible to do this for no added costs using DIY methods like posting jobs on Linked In or Indeed.

However, anyone wanting professional help to sift through resumes and conduct initial interviews will need the help of a professional recruiter. These charge in the range of 15-18% of the candidate’s starting salary.

Stock and equipment

All businesses need equipment of some sort, from computers and software to tools and more. Retail businesses will need stock to sell.  Both of these can easily cost a business thousands of pounds initially. The costs will depend on the type of business you’re starting.

For example, a t-shirt designer and seller will need stock in a range of colours and sizes before they can start selling online. This can be a significant investment. And if production lead times are longer, it might be necessary to order larger volumes of stock to ensure you’re never out of stock.

Marketing costs

If nobody knows about you, it’s hard to grow a business. For this reason, marketing can be a wise investment for any new business just getting off the ground.

To start with, this means having an attractive and easy-to-use website, as well as a presence on social media. Sites like SquareSpace have fantastic templates for building a website quickly and easily. Their starter business packages cost just £15 per month, with a 30% discount for those paying annually. And if you’re starting a new business, you’ll need at least a year to see if it’s working so might as well buy the annual package.

You can also engage in paid digital marketing (i.e. Google ads) to attract new customers. If this is new territory for you, it’s relatively easy to hire a freelance marketer to help you get started.

Premises

Unless you’re running a home-based business, you’ll need to prepare for significant expenses for a business premises. Costs will vary tremendously depending on the size and type of space you need, as well as your location.

Companies like Office Hub source shared spaces for businesses of all sizes, which are ready to move into as they offer furnished options. Examples of costs include a space for 4 people in the outskirts of London for £459 per week.

Claire James

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