By pearladmin
June 14, 2022
When considering launching a new business, you need to ask yourself a fundamental question. Do I have enough cash to get my business idea off the ground? If the answer is ‘Yes,’ you wonder how much money will be needed to start your new business in the UK?
The costs of starting a business can be vast (remembering to put aside financial resources to stay up and running). Calculating the costs of your new business idea will help you assess its viability. The cost will also depend on the location and sector. For example, opening a physical food store will cost much more than opening an eCommerce store and even less than setting up a freelance marketing consultant.
This article will outline some of the start-up costs you may encounter and provide options that might help keep your costs down. Keep an eye on those all-important small business finances to sidestep any unexpected costs, which are common reasons businesses fail.
On average, around 42% of UK businesses started up are still going strong five years later. The key is having the proper guidance and having enough budget to see you pass your launch.
It is essential to determine whether you have sufficient funds to get started and then be able to keep your business going. If you do not have enough cash to self-fund your venture, look into the various funding options to make sure your business idea is financially viable in the long term.
Recent research from the Daily Telegraph stated the average UK start-up would spend around £22,756 in their first year. Though this figure may have gone up or down slightly in the intervening years, it is still a useful breakdown:
If, having read this article, you want to take the following steps in setting up your own business, here are a few low-cost ideas that you could start from home. Without having to worry about the cost of premises, reduced commuting, and most of the computer hardware already at your disposal, you could get one of these businesses off the ground very quickly:
It is always worth considering how much you might need to spend on legal advice or using the services of an accountant. Many solicitors and accountants will give the first consultation for free, mainly if they think you will become a regular client.
Many new business owners do not always consider professional advice before starting their venture, yet the early planning stages are essential to get it right. On the legal side, you may have to determine your company structure (i.e., sole trader, a limited company, a business partnership, or a limited liability partnership?) before registering your business. If you plan to have more than one owner, a partnership or limited liability company may be best, or if you will be selling stock to the owners, a corporate structure is more suitable.
Paying an accountant a retainer fee so you can consult as needed can help keep costs down if your business has complex finances or multiple revenue streams. In addition, understanding accounting fundamentals would help avoid cash flow issues.
If you choose to set up a limited company, you can do this relatively cheaply through Companies House; most people use an intermediary firm to complete the paperwork. Costs start at around £15, but if you are looking for a registered office or company secretary, the costs are likely to go up by a few hundred pounds.
Unless you intend to work from home, you need to find business premises or lease an office from a commercial landlord.
Many commercial leases operate every quarter rather than monthly, which means you could be caught out by a hefty bill every three months rather than paying out a regular sum. This particularly applies to retail outlets, which is why so many run into financial difficulties. Make sure you build this cost into your business plan or budget.
If, on the other hand, you need office space, you might want to consider serviced office leases as they offer shorter arrangements, more flexibility, and the opportunity to pay monthly. Serviced leases always include business rates, which can otherwise be a significant financial burden over and above a standard lease.
Even if you choose to work from home, there will still be setup costs. You will certainly need to buy some office furniture and computer equipment and being at home all the time will push up your monthly electricity and heating bills.
Ensure you have insurance in place from the first day of operation as it can help protect business owners against everyday risks, such as stock or premises damage and legal costs. It is vital to get suitable types of cover for your business, so you have every aspect of your company covered.
There are many different business insurances to consider, from public liability insurance, employers' liability insurance and professional indemnity insurance, and other insurance covers specific to equipment, tools, and premises.
Having business insurance can add credibility to your business, or if working as a sole trader, as it demonstrates you are a trustworthy company to do business with.
If you are starting a food, fashion, gardening, or homeware business, having a regular stock supply is likely one of your highest cost outlays. Suppliers will offer 30 days’ credit which is helpful during the first couple of months of trading when cash flow might be a little tight. Remember to shop around to get the best deals from suppliers.
Tools and equipment can also be a big upfront but necessary expense, as without these, you will not be able to start supplying service from the moment you open your doors.
Start-up costs will vary from business to business – here is a helpful checklist:
As part of the day-to-day running of a business, there may be an element of travel involved to meet clients, networking events, exhibitions, and sales meetings. Make sure you factor your travel costs into your business expenses and remember you can offset these costs against your tax bill.
Having a marketing plan is key to any growth. It would be best to assign a large portion of your budget to boost the visibility of your start-up and establish a digital marketing presence promoting your service offering to new customers.
The type of marketing strategy you employ and how much you spend will vary from business to business. Whilst direct mailouts might involve a substantial outlay to cover client database purchases and using a marketing automation platform (EG: Keap, Zoho, Mailchimp), there are other online marketing techniques such as social media platforms to raise awareness and drive traffic to your website are free to use.
Optimising your website with solid keywords will help you achieve a strong position in search engine results. This is a low-cost but highly effective way to get your small business seen by a broad audience and generate leads.
Too many businesses make the mistake of not allocating enough of their budget to marketing, and start-ups that are tight on money will often neglect their marketing strategy altogether to save money.
Making that leap to start your new business can be life-changing. Of course, there are risks, but the reward of having a happier work-life balance, revenue potential and being your own boss, can be incredibly satisfying.
Starting a business requires a vision and goals. Budgeting for launch is critical, but so is planning for growth.
Business expenses include much more than just the initial start-up costs. It would be best if you planned for unexpected obstacles, developed a viable strategy to attract and convert your ideal audience, and budgeted for ongoing fixed and variable costs.
Choosing your company structure and accounting methods is the best place to start. Once this is determined, you can begin calculating expenses for your specific business.
Seize every opportunity to cut costs. Remind yourself that this is a marathon and not a sprint. To survive beyond your first few years in business, you must have a clear understanding of your financial performance.
We love helping new start-up businesses succeed. Tell us about your great commercial idea, vision, and long-term goals, and we will help you every step of the way
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