11 common costs of running a business

When running a business, the various costs can quickly add up. If you don’t properly plan for those costs, it could lead to financial trouble further down the line. 

In this guide, we’ll be looking at some of the most common costs of running a business and the best way to manage those costs. 

In particular, we’ll be talking about these common business expenses:

1. Insurance
2. Technology
3. Property
4. Vehicles
5. Legal documentation 
6. Equipment
7. Stock and supplies
8. Employees
9. Professional services
10. Marketing
11. Taxes

After going into more detail about these common costs, we’ll include some information about how to claim business expenses and how to manage your budget with accounting software. 

No matter what industry you’re in, you’ll probably need to buy several insurance policies. Some of the common ones to consider are:

• Employers’ liability insurance.
• Professional indemnity insurance.
• Public liability insurance.
• Business premises insurance.
• Business contents insurance.

Here are some common technology costs:

• Software licenses
• IT support
• Website hosting
• Data storage
• Email accounts
• Mobile phone contracts
• Payment gateways

If you decide to base your business in a physical location, then property costs will take up a large portion of your budget. The prices will vary drastically depending on the size and location of the building, but some common property costs to account for include:

• Rent or mortgage payments.
• Utilities, like gas, electricity, water, waste management.
• Business rates.
• Maintenance costs. 

Whether vehicles play a crucial role in your business model, like a delivery service, or you’re just travelling to meet clients and suppliers, vehicle costs are an ongoing cost that you need to plan for. 

The main costs associated with vehicles are:

• Purchase or rent payments. 
• Insurance.
• Fuel. 
• Servicing. 
• Repairs and maintenance. 
• Tax.

Depending on your industry and local council rules, you may need to apply for specific licenses, permits, and documentation. 

Get in touch with your local council for guidance on their regulations and ask them about prices. 

Some businesses, like construction and farming, will have considerable equipment costs. But even small, office or home-based businesses will need some basic equipment, like phones and computers. 

On top of the equipment itself, you should also consider additional costs, such as:

• Delivery fees.
• Storage costs. 
• Upgrades.
• Repairs and maintenance. 

Stock will be a major cost for trading businesses. The exact cost will depend on the stock you’re trading, the particular supplier, and the scale at which you buy. 

Normally, there are discounts for larger orders, and you might be able to renegotiate prices with your supplier after you’ve built a good working relationship. 

As well as stock for sale, you’ll also need to budget for general supplies used in more workplaces, including:

• Desks.
• Chairs.
• Tables.
• Kitchen amenities, like kettles, fridges, and coffee machines. 
• Stationery. 

If you plan to hire staff, it’s not just their wages you need to consider. There are other ongoing costs involved with hiring, such as:

• Employee benefits. 
• The cost of hiring. 
• Sick pay.
• Holiday pay. 

Setting up and running a business can be complicated, so it’s normal for business owners to hire outside help to deal with admin, legal paperwork, and financial management. 

To help you out, you might find yourself spending a fair amount on solicitors, accountants, mortgage advisors, and bank vendors. 

Spending money on marketing is essential if you want your business to take off in any meaningful way. Some common marketing costs are:

• Branding costs, like trademark registration. 
• Website development. 
• Advertising. 

Most businesses need to pay some kind of tax on their earnings in the form of income tax or corporation tax.

Many of the costs mentioned in this article can be claimed as allowable business expenses, meaning you can deduct their costs from your taxable income. 

The costs can only be claimed if it’s wholly and exclusively for the purposes of running your business. Some common examples include:

• Office costs.
• Travel costs.
• Clothing expenses.
• Staff costs.
• Things you buy to sell on.
• Financial costs.
• Costs of your business premises.
• Advertising or marketing.
• Industry-related training courses. 

As well as business expenses, some capital allowances can also be claimed. Capital allowances are for one-off purchases of things like:

• Equipment.
• Machinery.
• Business vehicles.

If you use something for business and personal reasons, like a car, you can claim a proportion of the costs as business expenses. 

Similarly, if you work from home, you can claim a proportion of the running costs, such as

• Heating.
• Electricity.
• Council Tax.
• Mortgage interest or rent.
• Internet and telephone use

With all the common costs of running a business, it can be tricky to keep track of your finances. But it could be a lot easier if you use accounting software, like the kind that’s built into the Countingup business account. 

Countingup is the business account with built-in accounting software that allows you to manage all your financial data in one place. With features like invoicing on the go, receipt capture and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

Find out more here.