The Costs Of Starting A Business

The Costs Of Starting A Business

Everyone knows that starting a business can cost a lot of money, but what exactly are these costs?

Well, it depends a lot on the type of business you’re launching – opening a luxury hotel is likely to come with lots of high costs, whilst a home-based web development company may have very few costs. Here are just a few of the major costs to weigh up so that you can budget effectively, as well as some tips on how to save costs and find funding.


Many companies don’t have to invest in premises at all – it’s possible to run many types of business from home. This can save huge costs in rent, energy bills and maintenance.

Unfortunately, there are some businesses where this is not possible due to the nature of the work. If you’re setting up a gym or launching a restaurant, you’re going to need physical premises.

Renting is the cheapest option – you’ll usually have to sign up to a fixed lease of several years and give a deposit upfront worth several months’ rent. Lots of factors can affect the price of rent such as the location and the size of the building. By taking your time to shop around, you can find the best deal.

If you’re on a tight budget, you may be able to start as a portable business operating from a van (food trucks and travelling hairdressers are just two examples of this). Another option could be to share space with another company – this could include renting a room off a larger business or sharing an office if you need physical office space for employees.


Some businesses can be run with nothing but a computer and a phone (in fact, you could argue that some businesses can be run entirely on a smartphone). However, for a lot of other businesses certain specialist equipment is needed – this could be anything from POS displays to industrial machinery. In other cases, furniture may be needed including chairs and desks (and even beds in the case of a hotel).

A lot of companies will buy equipment on finance – this could involve taking out a loan to cover all of it or taking out finance schemes from suppliers of individual equipment. You may also be able to save money by buying used equipment.

According to the national funding reviews, funds are available for a wide range of industries, and low credit isn’t a barrier to applying. Equipment funding is provided for both new and used equipment and machinery across multiple industries.

Many companies forget to budget for security equipment and health and safety equipment – this could include security cameras, burglar alarms, fire extinguishers and protective clothing. Skimping on this equipment usually isn’t an option, so make sure to factor in this equipment.


Supplies and stock can also be a big initial expense to consider. Supplies includes finite use everyday items for your business such as printer ink, toilet paper and cleaning chemicals. Stock involves items that you plan to sell to your customers – this may only apply to retailers, manufacturers and catering companies.

It’s worth loading up on stock and supplies to begin with. After running your business, you’ll then develop an idea of how fast you go through these stock and supplies so that you can decide how much you realistically need to stock at once. This can be difficult when it comes to perishable goods – if you’re opening a restaurant, you won’t know which dishes are going to initially sell the most, so it’s worth factoring in some wastage costs.


Most businesses will need to invest in some kind of software whether it’s digital security software or accounting software. This usually isn’t a huge cost but it’s still worth considering in your budget.

Some software may require a single upfront fee, whilst other software may be paid on a subscription basis. By shopping around for software and reading reviews you can find the perfect programme for your needs. It’s also possible to build your own software with the help of a software developer – this could be more expensive, but could offer you a customer programme designed to your specs.


Insurance isn’t compulsory for all businesses. If you’re hiring staff you will legally need employers’ liability insurance, whilst companies using vehicles will need some form of vehicle insurance (fleet insurance can be a way of insuring multiple vehicles). These are the only two mandatory business insurance costs, however it could still be worth investing in other schemes as a precaution.

Property insurance for example could help to cover you for premises reparation costs as the result of burglary, vandalism or natural disaster. Public liability insurance could also cover you against lawsuits made by customers that are injured.

You can save costs on insurance by raising your deductible and by investing in health and safety/security measures.


Some companies may also need to apply for certain licenses, which could also cost money. This could include a food licenses, drinks licence, music license and entertainment license.

A home business may likely not need any of these licenses. However, when opening a bar, you may need to apply to all of these licenses.

Certain licenses may require doing training and gaining qualifications. For example, you can’t work as an electrician in most places around the world unless you’ve got an electrical license. Other trades may come with their own specific licensing. In other cases, there may be non-mandatory titles and badges that could still be worth applying to (for example, an accountancy firm may want to apply to become a chartered accountancy in order to build their credibility).


Taking on employees can be a big cost for many companies. Some of the costs of taking on employees have already been covered such as insurance and equipment – however there are other costs on top of this such as the initial cost of recruitment, training costs, your employees’ wages and employee benefits.

There are a number of legal requirements to consider when taking on employees which can make it difficult to save costs in this area. Besides, being too miserly could have a negative impact on your employees’ motivation.

Some companies are able to save costs by outsourcing instead of hiring in-house staff. There may also be the option of hiring temporary staff for businesses with seasonal highs and lows, as well as potentially hiring part-time staff if you need a helping hand but don’t have enough work to delegate to a full-time position.


Marketing is essential when launching a business. Whilst it’s possible to do a lot of this on the cheap by taking a DIY approach, some business owners may feel that they benefit from hiring professionals to help with marketing.

Marketing costs to consider could include building a website, designing packaging, creating adverts, investing in SEO, printing off flyers and hiring a PR company. Some companies may want to even consider hosting a launch party to help generate some initial buzz. Marketing should ideally be an ongoing expense – the best companies are constantly pouring money into promoting their businesses in order to keep attracting new customers.

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Poppy loves personal finance almost as much as she loves her two cats, Tif and Taz.
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