Starting a business can be super exciting, but it can also be extremely expensive. From putting the right insurance policy in place to buying inventory, getting to grips with business costs can be very daunting for new entrepreneurs.
Fortunately, there are ways and means to get yourself onto the business ladder without exhausting your personal bank account. In this article, we count down some of the key business costs you’ll need to consider, before looking at how you can cover them.
How to Plan for Business Start-up Costs
Before you can even start to lay the foundations of a new business, you need to come up with a financial plan. This is a document that will not only help you to manage your cash flow, but also tell if your business idea is viable in the first place.
From start-up costs to revenues, all the projections you have should be included, and the sooner you get this document up and running, the sooner you can start making headway with your business idea.
Business Incorporation Fees – up to £500
One of the first things you’ll need to do is to register your new business with Companies House. This will get the ball rolling from a legal perspective, and ensure that your new business is compliant with tax laws.
The costs associated with incorporating a new company depend on the complexity of the business involved. The more shareholders you have, the greater the volume of documents you’ll need to fill out – meaning that a sole trader will end up paying considerably less than a multi-director Limited Liability Partnership (LLP).
Office Space – up to £1,000 Per Employee, Per Month
One of the most significant ongoing costs faced by any business is real estate costs. Most start-ups need somewhere to operate from, and if you aren’t lucky enough to already own a suitable property, you’ll need to get comfortable with paying your landlord.
How much you pay will ultimately depend on the amount of space you need, but it’s really worth considering where you want to situate your business. The question to ask here is whether that central location will really merit spending twice as much on rent.
For businesses that are starting up in retail, wholesale, manufacturing and distribution, stock is an essential part of making money. As the saying goes, it takes money to make money.
How much you’ll need to spend on your inventory depends on the products you’ll be selling, along with how easy they are to source. For retailers, it’s always worth checking if you can get your inventory wholesale – as doing so will often dramatically decrease your long-term overheads.
Marketing – up to 10% of Your Total Budget
Marketing is a non-negotiable activity for new businesses as they strive to compete against far more established companies. By spending money on search engine optimization (SEO), pay per click (PPC) advertising, and social media management, you can carve out a real presence for yourself online that could translate into future sales.
You’ll have to stump up the advertising money first though, of course.
Website – up to £40 Per Month
In a similar vein, it’s almost a given that modern businesses need a website. What many people don’t know, however, is just how expensive it can be to purchase and maintain a web domain.
From Wix to WordPress and Weebly to Squarespace, the important thing is to choose a platform you’re comfortable with – as you’ll probably be spending a lot of time with its interface.
How to Pay for Business Start-up Costs
Once you’ve established how much it will cost to get your business up and running, you’ll need to actually lay your hands on that money. In many cases, high street banks are unwilling to extend new lines of credit to unproven start-up businesses, but that doesn’t mean you can’t get a £1000 loan by applying via an online credit broker.
However you decide to finance your business, it’s important to remember just how important planning can be. From knowing how and when you’re going to repay your debts to managing your income and outgoings, getting to grips with cash flow and financial control is a key skill you’ll need to run any firm.
Just remember, if you can handle the money, you’ll be halfway to making a real success of your start-up business.