As you may have guessed, there is no definitive answer to how much it costs to start a business. Figures can vary widely depending on what you’re going to sell and the industry you’ll be entering. However, it’s possible to estimate some of these figures.
If you’re an aspiring entrepreneur wondering how much cash you should set aside for your new venture, keep reading to find out. The UK’s leading company formation agent, Rapid Formations, will guide you through some of the typical start-up expenses you should expect.
Limited company registration
If you choose to operate as a sole trader, it won’t cost you anything to create your trading entity. Some entrepreneurs start as sole traders (this is also useful if you want to test the waters with a side hustle) and convert to a limited company later down the line.
You could, of course, incorporate a limited company straight away. There are certainly many advantages to doing so, such as tax efficiency and limited liability protection (as a shareholder, you’re only liable for the company’s debts up to the nominal value of your shares).
The good news is that the UK is one of the most affordable countries in which to start a business. If you were to choose to use a company formation agent, such as Rapid Formations, the cost of incorporating a company starts at £52.99 (Basic Package) and this includes Companies House filing fee of £50.00.
Business premises
Your workplace is one of the biggest expenses when starting a business, especially if you need to source a traditional office. The location and the amount of space you need will make a huge difference to the price.
According to the workplace design company, Oktra, London, Oxford, and Cambridge are the most expensive cities in the UK to rent a traditional office in. In these high-profile areas, you can expect to pay up to £140 per square foot for your business premises.
Meanwhile, Newcastle and Liverpool are on the opposite end of the scale, with prices of around £32 and £27 per square foot, respectively.
However, there are plenty of flexible and cost-saving solutions nowadays, which are ideal for new businesses with limited budgets. Rather than locking into lengthy, rigid, and costly contracts, you could explore more agile options, such as co-working spaces or serviced offices, which you can rent short-term.
You could also consider working from home if you have the space (and if the nature of your business allows it). This will help bring the cost of starting a business down considerably.
Decor and furnishings
You’ll likely need to budget for decor and furnishings. In a commercial office, for instance, that includes things like:
- Desks
- Chairs
- Computers
- Phones
- Storage facilities
- Printers
- Stationery
All these items can be quite costly depending on how big an office you need to furnish. However, a simple way to cut these expenses down is to use a co-working or serviced office, which comes fully furnished.
Equipment
Next is your business equipment, the cost of which will vary enormously based on what you sell.
But there are plenty of low-cost businesses you could start, too. Ventures like affiliate marketing and dropshipping are popular options as there’s no need to hold physical stock, and you can work flexibly from anywhere—all you need is a laptop.
You should also consider whether or not you’ll need a business vehicle, which will add to your start-up costs. You’re likely to need a car or van if you want to start a trade or client-facing business.
Equipment costs are difficult to estimate because there are so many different variables. However, they don’t have to cost the earth. Even if you need to invest in a lot of equipment, there are ways to cut costs, such as leasing or buying second-hand.
Business insurance
Insurance is another significant cost to factor in when starting a business. Depending on what you do/sell, you may need different types of protection, but here are some of the most common ones you might need in the UK.
Professional Indemnity (PI) insurance
PI insurance protects you if a client suffers damages or losses due to your work. For a new business working with a handful of clients, this won’t cost you much—you could pay less than £10 a month.
Public liability insurance
This is essential if you deal with the general public. Public liability cover protects you if you damage someone’s property due to your work or if they have an injury on your business premises. Again, this shouldn’t be expensive—under £10 a month for a new company.
Building and contents cover
You are personally liable for your commercial property and the assets within it, even if you rent it from a private landlord. That includes everything from your office supplies to stock, furniture, and fittings. So, it’s essential to protect it with building and content cover.
Your premium will depend on the item value you want to protect. For a new business, that could be around £200 a month.
Business vehicle insurance
If you drive a vehicle exclusively for work purposes (whether all or some of the time), you’ll need specific insurance that covers it for business use. Standard car/van insurance is typically for commuting and leisure, so this cover won’t be adequate.
To give you an idea of how much this might cost, GoCompare data shows that the average van insurance in Q2 2024 was around £460. However, your premium will depend on the type of vehicle, the level of cover you need, and your driving experience.
With any insurance policy, it’s always best to shop around and use comparison sites to find the best deal for you and bring your business costs down.
Website costs
Your website is one of the main ways that customers will discover your brand, learn more about your products/services, and shop with you. It will also be an integral part of your advertising.
Here are a few website builder platforms we recommend:
- WordPress: Business plan costs £20 a month
- Wix: Business plan costs £25 a month
- Squarespace: Business plan costs £17 a month
If you’re starting an e-commerce business, Squarespace and WordPress are both suitable for creating a safe shopping experience and sending invoices. However, remember to factor in transaction and processing fees into your start-up costs (3% on Squarespace and 2% on WordPress).
Branding
It may not be your immediate priority, but branding plays a huge part in starting a successful business. If you have a solid idea in mind already and are confident to stick with it, you could create your own name and logo, costing you nothing. However, if you need the help of a creative agency or graphic designer, then this will add to your initial costs.
But this is another expense that can vary greatly. You could pay as little as £20 for a freelancer to put a logo together for you or thousands for a professional agency.
It all depends on your vision and objectives, so it may be worth investing a little more for a high-quality service that meets your needs. Remember that the final design will encapsulate your brand identity and communicate who you are to future customers, so it’s essential to get this step right.
Once you have a name and logo you’re happy with, you’ll be able to use it in your advertising and merchandise. That could include:
- Storefront signage
- Branded stationery
- Vehicle livery
- Packaging
- Website design
It’s difficult to say how much branding might cost you when starting a business. According to the branding agency, Toast, a basic branding project in the UK can cost anywhere between £1,000 and £5,000. However, expect these figures to double (at least) if you have a large-scale project in mind and choose an agency in a prime location like London.
Advertising fees
Spreading the word about your new business is a cost that can quickly add up. But the great thing about advertising is that you can do as much or as little as you need to, and you can typically tailor campaigns to suit your budget.
Let’s start with free advertising: search engine optimisation (SEO). While it’s a long game, it won’t cost you anything. And if you get it right, it can really pay off later down the line.
There are numerous SEO guidelines that help improve your rankings. Generally, they involve incorporating keywords/phrases, ensuring your content is easy to read, and producing genuinely useful, authoritative content. You can, of course, pay to bump your website up on Google’s results, but this can get quite competitive.
Then there are other forms of advertising, such as:
- Email marketing: This could cost as little as £5 a month. Moosend and Hubspot are great options for new businesses.
- Social media: It’s free to create profiles, and campaigns are normally based on a pay-per-click (PPC) basis.
- Physical advertising (e.g. leaflets, posters etc.): It depends on the material, size, quantity, and printer service you choose. Budget a few hundred pounds for physical advertising.
- Influencers: Expect nano-influencers (ideal for new businesses) to charge between £100 and £350 per sponsored post.
Professional help
Being an entrepreneur means having your fingers in all the pies, so to speak. But this can become overwhelming and unsustainable over time, so it’s important to seek professional help where needed.
For instance, you may need a bookkeeper to track your cash flow or a marketing professional to help you execute successful advertising campaigns. Such services are costly, ranging up to thousands of pounds.
We recommend narrowing down your non-negotiables. What service do you absolutely need to outsource, and what can you realistically handle yourself? Only paying for what you need will help cut costs when starting a business and ensure you use your budget wisely.
The bottom line
Starting a business can be costly, but it doesn’t have to be. Some common expenses for future entrepreneurs to expect include registration, advertising, and business insurance. But there are ways to keep costs low, with many free options available.
If you’re ready to start your business, Rapid Formations can help. Choose your ideal company formation package and become a business owner for as little as £52.99. Their professional team also offers a range of corporate services throughout your company’s life to make running a business as easy as possible. Visit their website to get started with Rapid Formations today.