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Exclusive List of Business Startup Costs Everyone Forgets About

 

Business Startup Costs UK

Business start-up costs cover all the one-off fees associated with the creation of a new business. These outgoings can be grouped into two types of start-up spending:

  • Research Costs
    During the infancy of any start-up business it’s necessary for entrepreneurs to invest in researching the potential need for the business i.e., market research. Investigatory start-up charges cover analysis of existing comparable products on the market, transportation, labour supply, consultancy fees and expenses whilst doing deals with potential suppliers and distributors.
  • Pre-Launch Costs
    Start-ups must also factor in costs incurred once the decision has been officially made to launch and trade but before it is actually open for business. Such examples of typical pre-launch start-up costs include digital and traditional advertising in readiness for launch, office or studio furnishings and equipment, damage deposits with commercial property landlords, salaries for staff training and installation charges for digital infrastructure e.g., Wi-Fi.
    However, it’s always worth bearing in mind that some of these start-up overheads are likely to roll into one when the business is up and running.

To help avoid any unexpected costs when starting a business, read on for details of the most common startup costs a new business may face.

Business Start-up Costs List

Once your business is up and running there will be two types of start-up costs that you record on the balance sheet – fixed and variable business costs.
Fixed costs relate to outgoings that must always be paid regardless of whether the business turns over a profit. Businesses in all types of industry are going to experience different types of fixed business costs.
Below, we list the most common start-up costs for a business examples, which will all require payment no matter what happens to the business day-to-day.

Examples of fixed business costs

  • Professional fees
  • Insurance
  • Premises costs
  • Staffing and employment
  • Equipment and supplies
  • Stock
  • Sales and marketing
  • Finance
  • Technology costs

Professional Fees

These could include things like the cost of hiring an accountant, solicitor, lawyer, or other expert professional to deal with the legal aspects of starting a business such as company formation, copyright protection, drafting partnership agreements or other fees you may need to pay to the Government for certificates and inspections for health and safety or food hygiene, for instance.

Insurance Costs for New Businesses

It’s important to note that every type of new business will have slightly different priorities in terms of risk protection. A solid business insurance policy will protect your business should anything go wrong, ensuring compensation and covering legal costs.
The recent COVID 19 pandemic has highlighted the need to have a business interruption insurance add-on to your main policy too, to protect you against the unexpected.
Some of the typical types of insurances for business start-ups include:

Employers’ Liability Insurance
The only type of business insurance that’s a legal requirement if you employ anyone. Businesses can be fined up to £2,500 for every single day they don’t have this protection in place. It’s designed to protect any compensation claims made by employees for injuries or physical damage caused at work.

Professional Indemnity Insurance
This covers your business in the event of any compensation claims made by a client or member of the public in the event they believe you’ve made a mistake at work i.e., breaching confidentiality agreements or copyright infringement.

Public and Product Liability Insurance

If your business works closely with or in the public eye or your customers come to your premises this protection covers your business in the event of compensation claims made by someone who believes injury or damage was caused by your business. Similarly, product liability cover guards your business in the event a product you sell causes injury or damage to a member of the public.

Building and Contents Insurance
Whether you rent an office or studio, or a workshop or a shop front, it’s your responsibility to cover the value of the contents within your workplace. Additionally, if you own your premises, you’ll have to insure the building itself too as part of the terms of your mortgage.

Premises Costs
Renting or leasing commercial property will include monthly costs that you should factor into your regular outgoings. Service charges and connection of utilities, followed by utility bills (electricity, gas, water, telephone) will also ned to be considered.

Staffing and Employment Costs
There are a wealth of staffing options available to business start-ups, from full-time employees to freelance contractors. You will need to decide which options are the best financial fit for your business; is your income already at a level that the business can handle a full-time wage? Would you prefer the flexibility of hiring freelancers as and when you need them? These are some of the questions you will need to ask yourself when the time comes to think about staffing.

Equipment and Supplies
There are many essential first-day purchases for a start-up’s office:

  • Telephony – you may be able to rent these
  • Internet connection
  • Computers/laptops/printer
  • Business software and associated monthly licence fees
  • Furniture incl. desks, chairs, tables, storage cabinets etc
  • Stationery
  • Signage
  • First aid supplies
  • Power cables/extension cords
  • Other miscellaneous items such as a kettle, cutlery, microwave etc etc

Stock
If you’re a retailer that’s going to be reliant on stock, the first thing you need to do is ascertain the best possible suppliers and manufacturers to establish friendly working relationships with.
It’s an easy mistake for start-ups to buy too much stock at once without ultimately knowing what sells most and for the highest margins. Be realistic with your initial orders and allow your business to test the water without too much financial pressure.

Sales and Marketing

It’s almost unheard of for businesses today not to have a website; so whether you design your own website or pay a freelancer or an agency to design one for you, you’ll need to factor in time and money to develop an online presence
A free way to get some initial exposure would be to create a Facebook and Instagram business page, then badger your friends to share the hell out of it! You’d be surprised how much traction you could make in this way, without spending penny!

Finance and Business Loans
Another fixed cost that’s often unavoidable for ambitious businesses is the repayment of business loans or finance. For entrepreneurs without a bottomless pit of money to invest, equity and debt finance options are becoming increasingly popular with new and growing companies.
When looking at applying for a loan or finance, make sure you do your homework to ensure you get the best and most affordable repayment terms available to you.

Technology Expenses
There are a lot of technology based things you will need to invest in when starting a business. These include;

  • Software licenses
  • IT support
  • Website design, build and hosting
  • Data storage
  • Email accounts
  • Mobile phone contracts
  • Payment gateways
  • Any third-party integrations or services

Variable Business Costs
The difference between fixed and variable business costs is that the latter change in line with sales or production volume. As production increases, variable business costs rise with it. Variable costs include;

  • Individual product cost
  • Packaging and Delivery
  • Staff Costs

Individual Product Costs

For businesses that must deal with suppliers for their goods, individual product costs can vary on a sliding scale format, largely depending on quantity. Generally, the more you buy of a product from a supplier or wholesaler, the less you’ll pay per item.
Those businesses most reliant on raw materials to help create their finished product will have more variable costs than other firms.

Packaging and Delivery
In terms of packaging and shipping, delivery is another key variable business cost. As a business moves more of a specific product, the costs for its packaging and transport will increase with it. Conversely, during times when fewer products are sold, delivery and packaging costs will consequently diminish.

Staff Costs
Staff wages and associated expenses can be placed in both variable and fixed business costs sections. For instance, if a business hires employees that are only paid the hours they actually work, this is regarded as a variable cost. However, if they are paid fixed monthly salaries no matter how many hours they work, this is a fixed business cost.

Businesses in their infancy should work hard to keep fixed and variable start-up costs to a minimum, simply because you’ll need to earn less to break even. It’s good discipline regardless to avoid overspending and purchasing things your business doesn’t urgently need. With a low-cost base, your chances of long-term success are that much greater

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Business Startup Exclusive List of Business Startup Costs Everyone Forgets About