The early stages of setting up a business are an exciting, busy time. But before the customers, the sales, and the profit, come the costs. Every new business comes with initial expenses – as they say, it takes money to make money.
Start-up costs are the one-off expenses and early outgoings needed to get things off the ground before you start trading. Knowing what you will need to pay for will help you plan your budget and set your prices accordingly.
Here’s the UK’s leading company formation agent, Rapid Formations, to help you understand the eight most common start-up costs. You might not need all of them, but take note of the ones that apply to your business.
1. Company registration
To set up a limited company, you’ll need to formally register it. Once you do this, no one else can use the same name (or one that’s too similar), and this will help you protect your brand from the get-go.
Rapid Formations’ company registration packages make the process fast and affordable, ranging from £52.99 to £99.99 depending on the level of services you require. The £52.99 Basic Package includes your company registration and a free filing of your first Confirmation Statement, while the £99.99 All Inclusive Package includes VAT registration, PAYE registration and more to save you time and money.
2. Licences and permits
Some types of businesses need licences or permits to operate legally. For example, if you sell food or alcohol, take care of children, or play music in public, you’ll need the right licences before you start trading.
You can find out which licences you need by checking your local council’s website and searching keywords on the gov.uk website’s Find a licence page.
3. Insurance
Setting up business insurance helps you cover the cost of unexpected problems. This can give you peace of mind if you ever come up against accidental damage or legal claims. In some cases, it’s a legal requirement – for example, when you employ staff, you must have employers’ liability insurance.
Other types of insurance, such as public liability or professional indemnity, aren’t compulsory but are strongly recommended depending on the nature of your work. They can protect you if a customer is injured on your premises or if someone makes a claim against you for a mistake or poor service.
Policies and costs vary depending on your industry and the level of cover you choose, so research which cover best suits your needs using comparison sites.
4. Equipment and tools
You may already own essentials like a laptop and a phone. But you likely need some kind of new equipment before you start selling. Make a list of everything you’ll need by thinking through your daily tasks. This might include:
- Machinery
- Packaging
- Office furniture
- Shop fittings
- Tills and card machines
These costs may add up quickly, but it’s worth investing in reliable, good-quality equipment where you can. Cheap items might save money initially, but they often need to be replaced sooner, or they may make your business appear less professional to customers. If buying outright isn’t possible, you could consider renting.
5. Stock or materials
If your business involves selling physical products, you’ll need to buy stock or materials to manufacture your products before you can start trading.
Also think about how much stock you need to buy to launch your business, and how you’ll store it. Do you have enough space at home or in someone else’s property? Or will you need to rent a storage unit or warehouse?
6. Branding and marketing
It is possible to start trading with just a basic logo and website that you designed yourself. But if you want to appear more professional and established, it is worth investing in good branding from the start. This will help customers notice you. Depending on your budget, you might need to pay for:
- Logo design
- A unique font
- A professional website
- Photography or video content
- Social media ads
- Influencer marketing
The most essential of these purchases may be the website. This is where your customers will go to buy your products or services or find out more about what you do. Buying a domain usually costs around £10–£20 per year, but all Rapid Formations customers receive a free .com or .co.uk domain with their company registration purchase. This makes it cheaper to get your business online from the get-go.
7. Premises
If your business needs a physical space, whether it’s a shop, office, studio, or workshop, premises will likely be one of your biggest start-up expenses. Renting a commercial property usually means that before you even move in, you will pay a deposit, the first month’s rent in advance, and agent fees. Next, you will need to factor in utility bills, business rates (unless you qualify for small business rates relief), and possibly service charges if you’re in a managed building.
These costs can vary hugely depending on location, size, and type of space, so it’s worth shopping around and thinking about whether you can start small and scale bigger when you need to. Some new business owners choose to start from home to save money. Alternatively, co-working spaces can be more flexible and affordable than traditional office spaces.
8. Employees
Hiring staff means paying wages, employer National Insurance contributions, and possibly pensions. You’ll also need to budget for recruitment costs, payroll software or services and employers’ liability insurance.
If you’re not quite ready to hire employees, you could outsource work to freelancers, which can be more flexible and affordable early on.
Start your business with help from Rapid Formations
Start-up costs are a necessary part of getting your business up and running. Once you’ve worked out how much money you need to get started, you’ll be in a much stronger position to apply for funding and set your prices.
Ready to start your business? At Rapid Formations, we can help you get set up quickly and affordably, with expert support each step of the way.