How Much Does it Cost to Start a Business in the UK?

If you aim to own a business soon, one of the key questions you would be asking yourself is the cost of starting a business. The cost of starting a business depends on a lot of factors. From the business type, location of your business, and the industry you are venturing to, there’s a lot to consider.

Moreover, starting a business also involves looking into marketing and branding aspects, stocking, getting necessary equipment and machines, registering the business, and many more. While some types of business require a lot in terms of cost for it to be set up, others require minimal cost.

In this guide, you will get to explore all you need to know about the cost of starting a business within the UK. You will get to understand the specific business setup cost you must prepare for in the course of starting a business and many more.

Common UK Business Startup Cost

When determining the total cost you will need to start up your business within the UK, It is important to understand the particular expenses you will make before and after the business commencement. Below is the list of a typical business cost you would want to take into consideration.

1. Business Premises/Space

One of the most essential costs that should top your list is the business premises or space that would be used. Would your business need only a single office or multiple ones, would it need a production or storage site or would you also need a parking space within your business premises? Those are the points to consider here. Several types of businesses have varying needs when it comes to business space.

The cost of your office or company space will greatly be dependent on your business location, the size of the office or building you are getting, and whether or not you are renting or buying the space. Although renting a space could save you more cost than purchasing, you would however need to note that rents have to be renewed.

Some other utility costs like water, electricity, and gas have to be considered here too.

2. Business Research

Doing some business research before you launch your business officially is important. Understanding your business market and how businesses work within the UK is essential. As such you would want to do some research using Google, asking relevant questions from families and friends, going through social media platforms, etc.

Although all these might not cost you much, however when you dig deep into making professional research like using a firm to carry out market research, then you would need to spend. The cost of market research could vary from 100 pounds to 9000 pounds depending on how intense and the type of research you carry out.

3. Business Registration

Before you can legally start a business within the UK, then you have to register the business with the government. This would involve choosing a business name, determining your business structure, and paying the necessary fees.

Registering as a sole trader is generally free. As a limited company, you would pay 12 pounds if you’re registering online and 40 pounds by post. Limited partnerships would be required to pay 20 pounds and limited liability partnerships pay 40 pounds even if registration is done by post or online.

4. Equipment, Tools, and Machines.

When starting a business you would need to factor in the equipment, tools, or machinery that your business would need. Usually, the type of equipment, machines, and tools that you will need will be dependent on your business nature. If your business is in the production or manufacturing industry, then you would most likely need more machines.

Office equipment chairs, desks, printers, computers, etc. would most likely be needed by all business owners. If your business is selling products, you would also likely need more display cabinets, payment machines, and all of that.

Apart from the equipment that will be needed to carry out your work operations, you might need to consider other things that would make your workspace comfortable. These include air conditioning, water heaters, microwaves, kitchen appliances, and so on. It is important to make a list of these tools and machines, determine their cost, and get them before your business commences.

5. Website

Determining the cost of your website and domains is also crucial. Your business website would help you get a lot of visibility and sales if it’s set up adequately. So you must consider investing in it. The type of website you’ll need depends on your business nature. If your business is service-based, then a simple template website could be enough for a start. However, if it's products, then you might consider using WordPress, or WooCommerce as they allow you to create an online store where you can showcase your products and their prices.

6. Marketing

Another essential aspect you should consider is the marketing and its cost. Marketing is as important as your business itself and so you must take care of this. Although there is no specific amount as to the cost of the marketing you would need. However, you must be sure of what works when investing in marketing your business.

First, you would want to determine how much you would like to spend on marketing, Next would be to determine the marketing options to use. Before any other thing, consider marketing your business organically by using social media handles, telling friends and families what you do, and so on.

Apart from that you would need to invest in paid advertisement. You can do these through social media, email marketing, SEO, and so on. You could also consider using media advertising agencies and so on. In all, you must track down every marketing strategy that you use to determine what works and what doesn’t work for your business.

7. Recruitment and Payroll fees

If you’re starting your business on a low level, then you might only need to go through your payroll. However, you must make preparations for recruitment and payroll as the business could grow faster than you imagine.

On the other hand, if you wish to employ staff right from your business conception, then you must take note of the recruitment and payroll costs that are involved. Although you could do the recruitment process yourself but in most cases, it is better to use experts in recruiting employees. You would therefore need to pay for this service. Moreover, when employees work for your business, they need to receive salaries, pensions, healthcare, and other benefits.

8. Licenses and permits

Certain industries require that you obtain licenses and permits within the UK. The food, beverage, and the alcohol industry are some of the common ones.  The licenses are needed because they are essential requirements that allow you to legally operate.

It is therefore important to do research and be aware of the licenses and permits needed in your business industry before you start your business operations as failure to comply with this could lead to serious penalties.

9. Stock

Stock is one of the key costs everyone intending to start a business would want to think of. Whether your business manufactures goods or sells products, you would need to consider the cost of stock. If the business will be a production business, then you would need to include the cost of stocking raw materials. And if you will be selling products, then you would need to include the cost of stocking and sourcing for these products.

On the other hand, if your business would be a service-based one, then you might not necessarily need to stock. There is no specific cost as to how much you would need for stocking. However, you should be able to produce goods that will meet the demands of your customers for a given period.

10. Business Insurance

Getting insurance to cover your business and its operation is also necessary as it provides safety against unexpected circumstances. The cost of insurance could vary from a few hundred pounds to some thousands of pounds per year. This is so because insurance type and coverage differ. So you could spend less or more on insurance depending on what part of your business insurance covers, your type of business, and the industry type that your business belongs to.

Some types of insurance that are common among startups in the UK include employer's liability insurance, professional indemnity insurance, vehicle insurance, public liability insurance, and so on. You would therefore need to do research on the insurance coverage that you need before opting for them.

Different Classes of Business Cost.

As you’ve seen above, there are different types of costs you would go through when starting a new business. All of these costs are grouped into classes. While some costs bring back revenue to your business, others do not. Here are the classes of startup costs.

1. One-time cost

As the name implies, these costs are meant to be paid once. They are also known as the sunk cost and they include the cost of registering your business, purchasing a domain, or buying top-notch and expensive machinery.

2. Fixed Cost

These are costs that are paid on a regular or ongoing basis. These include costs like utility bills, payroll, rent, etc. These could usually be paid on an agreement basis either weekly, monthly, daily, yearly, or any other time frame as agreed.

3. Variable Cost

Variable cost directly relies on production. If production within your business goes higher, variable cost also increases. As such your variable cost depends on the quantity of goods to be produced in a period. For example, if the demand for a particular product increases in a specific season and the demand for the product becomes higher, variable cost also goes up.

4. Essential Cost

Essential costs are the costs you need to pay for your business to expand and flourish. These include costs of employing new staff, cost of getting new software, research and development costs, etc.

5. Optional Cost

Optional costs are the ones that could be spent when you have settled all the important costs for your business. They are called optional costs because your business can start without them, however you can invest in them as time goes on. These could include increasing ad spend or reach in digital marketing, subscribing to more sophisticated marketing tools, and so on.

Why do you Need to Calculate your Business Startup Cost?

Having an estimate of your business cost is crucial to your business growth and development. Here are some of the reasons you should calculate your business cost.

1. Estimating your business cost helps you prepare financially for your business as it helps ensure you stay within budget and don’t run out of funds.
2. It helps you determine if you can afford to start a business and it prepares you to seek funding as appropriate.
3. It shows to your creditors and investors that you understand the concept of business cost thus helping them build more trust with you.
4. Calculating your business cost also helps you determine if your business idea has the potential to achieve financial growth in the future.
5. It also helps ascertain if you need staff for your business and if you can afford it.
6. It prevents your business from going into dissolution as a result of a lack of funds. On the other hand, estimating a business cost could help promote your business growth.

What is the Cost of Starting a Business in the UK?

According to a study carried out by the Daily Telegraph, the average cost to start a business in the UK is 22,756 pounds. These costs include 6259 pounds for legal costs, 3937 pounds for accountancy, 4518 pounds for HR, and 5518 pounds for company incorporation. However, it doesn’t include the cost of production, stocking, machinery and tools, and many more.

It is therefore important to note that there is no precise sum up for the cost of starting a business within the UK. So many factors sum up to include what the total cost of starting a business is. While a business could consider renting an office or production building as the case may be for a business startup, another one could start its business from home while some other business enthusiast could buy a whole building to start up a business. Apart from that you could expect more startup costs for a business that manufactures goods than one that’s into ecommerce or renders a service.

Therefore it would help a lot to get the list of the common UK startup costs that are explained earlier and every other cost your business would be needing before estimating the cost of starting your business.

Can I Start a Business with Little or no Capital?

Although it is important to have business capital before considering starting a business, however, you can still start up even with little or no capital.

So in this case you would need to sell your skill or render services instead of selling products. Some of the services you could render include but are not limited to tutoring, freelancing, writing, dog walking, cleaning, etc. Once you have any of the skill sets, then you can look out for those in need of them and render your service.

Form Your Company with Incorpuk Today

Are you ready to make your business official? Start a Limited company with Incorpuk. This platform is loved and trusted around the world, and numerous entrepreneurs have expressed their satisfaction with the team’s prompt and dependable support, creative business strategy, and superior customer care. Being business specialists, we can help you choose the best business structure for your needs and support you through every stage of starting your own company in the UK. Contact us today.

Conclusion

Getting an estimate of your business cost before starting a business could help you ensure that your business doesn’t go out of funds in the long run. With the intense rate of small business owners closing up businesses due to lack of money, it becomes vital that you prepare thoroughly for your business costs and expect emergency or unforeseen costs as you plan to start your business.  if you have any questions on how much it will cost you to start a business in the UK, kindly contact one of our Incorpuk experts here.