Starting a business comes at a cost. Startup costs are the new business expenses you’ll face when becoming a business owner.

This guide covers start-up costs for small businesses, including:

  • What are startup costs for small businesses?
  • 7 small business startup costs to plan for
  • How to calculate your small business startup cost

What are startup costs for small businesses? 

Startup costs are the necessary expenses of starting your business. You’ll take them on to make you operational or ready to work with clients. 

They are the costs you cover before you even start selling products or offering your services. 

Your business startup costs vary depending on the type of business you start as each one requires different things. With that said, your business might be: 

  • Low-cost – Your business doesn’t have a high startup cost, or they are more affordable to take on. 
  • High-cost – Your business demands more startup expenses, which may be more expensive to handle. 

Knowing your startup costs is essential to planning. If you fail to calculate and fund these expenses, you could struggle with your business or put yourself in financial jeopardy. 

Learn more with our article on how to create a business plan for managing startup costs

7 startup expenses to plan for

1) Research costs

As you put together a business plan to set up your company, you may need to invest in market research

Some research may be free to access, but you could spend money on:

  • Books
  • Courses
  • Private reports
  • Membership access to journals, magazines, or databases

Some business owners even pay firms to do market research for them, leading to more credible and efficient results.  

2) Equipment and tools 

Depending on what your business offers, you’ll need different startup assets to get started.

For example, say you plan to start a coffee shop. In this case, you’ll probably need: 

  • Rental space with a kitchen
  • An espresso machine
  • Coffee bean grinder
  • Coffee cups and plates
  • A milk frother

These equipment expenses will likely be higher than if you plan to start an online tutoring business. For this, you’ll probably get by with a computer, strong internet connection, and video conferencing software. 

3) Inventory or supplies 

Aside from equipment, you’ll also need to stock up inventory or supplies based on what you sell. For example, if you open a knit shop, you’ll need to fill that shop with various yarns.

As you consider stock, compare supplier options to get an idea of what it’ll cost you to build your initial inventory

4) Registration, licences, and permits

As you turn your idea into a legal entity, you’ll also need to pay for any registration and legal fees. Some services require unique credentials, licences, or permits to operate. So research if you’ll need one and how much it’ll cost. 

For example, if you plan to open a childminding business, you’ll need a licence (through Ofsted), which costs £35.  

5) Insurance fees

You’ll also need to protect your business with insurance. You may have to pay fees towards public liability insurance or covering your inventory.  

6) Advertising and marketing 

Advertising and marketing costs are also crucial to consider in your startup costs. You might pay for design services to create a logo. Or, you could cover the cost of your website URL

Plus, think about what you’ll spend on digital advertising. These costs are important for growing the reach of your new business. 

See also: What is a good advertising budget for a small business?   

7) Loans, borrowed funds, and startup funding

If you get a business loan to set up your business, add this to your startup costs. Though this money may help you pay for other business startup costs, it still puts you in debt, and you’ll need to pay it back over time with interest

Thinking about whether a loan is the right way to fund your company? Check out our article on when to get a small business loan

How to calculate your small business startup cost

With the average cost of starting a business in the UK at £12,601, it’s easy to see why your startup costs are an important part of planning your business finances and determining what to charge for your products or services.

Budgeting can also help you find the hidden costs of starting your business. And doing it from the start will make your small business administration easier down the line.

Creating a starting budget 

While you budget for starting your business, it’s important to calculate startup costs.

This number can allow you to think about funding options, such as: 

  • Loans
  • Investors
  • Crowdfunding

They’ll also help you determine how long it’ll take to become profitable and create sales goals to guide you

Organising your finances

To stick to your startup costs and control your spending, it’s crucial to organise your finances. 

The best way to do this is by opening a business current account. This account lets you separate your business finances from your personal ones to easily track them

Accounting software will also help you understand and analyse the money coming in and out of your business. Countingup, the business current account with built-in accounting software, can handle both these needs

It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. You can stick to your spending goals with automatic expense categorisation, receipt capture, and cash flow insights. 

Save yourself hours of accounting admin so you can focus on growing your business. 

Start your three-month free trial today

Turn your startup costs into a successful business 

Now that you know what startup costs are for small businesses, you can manage them for a successful beginning. Just remember to: 

  • List which costs you’ll need to cover
  • Calculate the cost of starting your business
  • Budget well to cover startup costs

From there, it’ll be easier to focus on earning a client base to make your business profitable. Why not check out our article on the best ways to attract new customers