When starting a business there are the obvious expenses to think of – equipment and tools, raw materials, rent and utilities, and basic marketing. However, there are also many additional hidden costs associated with starting a business which many entrepreneurs are likely unaware of.

It is extremely important to learn about the associated costs of opening and running a business in the UK because they need to be factored into the company’s budget. Depending on the industry, location, and size of the planned company, these starting costs can run up to the tens of thousands of dollars, which can be quite a shock for anyone who has not already planned for them. 

These are some of the biggest and most important fees and costs associated with starting a business, but there are certainly others – as all business owners know, you always need to expect the unexpected when launching a new company. 

The first steps 

It is important to tally up your start up costs for a number of different reasons other than the shock factor. If your start up costs are higher than anticipated, you will need to adjust your fundraising efforts accordingly, and this could take some time and have an impact on projected launch dates. 

Once you have both a high and a low end estimate for the possible costs and an idea of the spectrum the costs will fall on, you can start to determine if you need more than one funding option or if your business can launch at all. If it becomes clear that you will need additional funding to launch your business, investors and lending institutions will be more likely to give you a loan if you have the start-up costs clearly organised and planned for. 

If the costs appear to be intimidatingly large and it does not look as if your business can launch, try to speak with a number of trusted advisors to get their perspective on the situation. You may need to take a step back and take a cold hard look at the entire situation, which can be difficult when starting your own business has been a long held dream or ambition. 

Getting incorporated 

Costs: £40 – £100

Getting your company incorporated is the first and most important start up cost, but thankfully it is a fairly modest expense. The UK government has a helpful guide online for incorporating your company and this is like something that you can do yourself or with the help of a lawyer. 

The set-up, filing, and incorporation fees are very minimal if you are filing yourself and can fall between £40 – £100. This does not mean that filing is not an essential step however. If you want to take on a loan, pay taxes, or hire employees, you will need to incorporate your company and make it an official entity. 

Accountancy and bookkeeping fees 

Costs: £150 – £600+ on accountancy fees depending on the size of the company, £8 – £25+ monthly on bookkeeping software

Many small business owners do not realise just how important keeping proper books of account really is. It is actually an offence to fail to keep proper books and can result in action being taken against the company and sanctions placed against the company in certain situations. 

The government needs business owners to keep proper books so that they can ensure the right taxes are being paid and that employees are being properly taken care of and paid. Tax information is also very helpful for government agencies and bodies which are looking to understand how a particular industry is faring and whether or not additional assistance is needed. 

Record keeping is also just an essential aspect of running a successful business. You will not really know if your company is growing, if a particular product is successful, or if it is the right time to expand without this vital information being readily available and accessible. It is also unlikely that you would be given access to loans and investment from lending institutions such as banks without this information. 

If you want to do it yourself, you can use a bookkeeping software, there are a number of platforms available for an affordable fee. You can also hire an in-house bookkeeper or hire a third party bookkeeper. 

Getting the fine print right

Costs: UK companies spend an average of £6,259 on legal costs when launching 

At some point, every company will need a lawyer to get involved. Whether it is drawing up the articles of incorporation, drafting contracts, or approving language, a lawyer is an essential expense for a company. The last thing any new company needs is to be facing a lawsuit or struggling to deal with a poorly drafted contract or lease. 

The fine print is incredibly important for helping a business to get running smoothly and to continue operating at top capacity. There are fill in the blank style online forms available, but it is often worth the cost to have a lawyer on hand when you need additional assistance and support. 

There are of course costs associated with hiring lawyers and dealing with legal professionals, but this is certainly one aspect of running a business in which an ounce of prevention is worth a pound of cure. Many of the smaller local or specialist law firms – or even online law firms – are available for work at very reasonable rates. 

Insurance and related fees  

Costs: will vary depending on the types of insurance needed (i.e. building, professional indemnity, public liability, employer’s liability, vehicle, etc.)

Nearly every company imaginable can benefit from a good insurance policy, regardless of its size, industry, or profit. Even just single owner-operator businesses often need insurance on the off chance that something could go wrong. Insurance policies are a way of protecting your company and investment and are certainly an essential expense. 

Not all insurance plans are created equally however and some forms of insurance are more essential than others. It is worth doing your research, looking around, and speaking with a number of different insurance brokers and advisers to determine the best insurance policies for your company. 

Once your company has grown to the point that you are ready to hire employees, that will also increase your insurance costs and burden, as you will need additional insurance policies for employees. This is all part of running a business, but these costs can add up fairly quickly, which is one reason why it is important to grow slowly, intentionally, and thoughtfully. 

Branding and aesthetics 

Costs: £1,000+ for brand audit, strategy, and guidelines, £2,500+ for brand strategy, and £10/month+ for logo design 

In addition to all of the paperwork, insurance, and professional service fees, there are a number of other important aspects which cannot be ignored. Branding and aesthetics are essential to a company’s success, no matter its size, industry, or geographical location. A high quality branding aesthetic can mean the difference between success and failure in an industry, and the first step to creating that would be to design your company logo.

The good news is that logo design does not have to be prohibitively expensive. The fastest and cheapest way to design a logo would be with a logo maker. Logo makers are online platforms which utilise AI, design technology, and other digital tools to help develop various company logo and branding options for users to choose from. 

Advertising 

Costs: new companies should plan to spend 12 – 20% of gross revenue on advertising

The internet abounds with examples of creative advertising, but the nuts and bolts of advertising and marketing are often much less exciting than many people are aware. Depending on the industry, advertising may be more appropriate online rather than in more traditional print or visual mediums. 

For example, a small makeup company will likely have more success in advertising on social media and online rather than an owner-operator contractor company which would be better served by taking out ad space in a local newspaper. 

Advertising is essential to a company’s success and it is worth taking the time to understand what the advertising costs will be before, during, and directly after launching the company. This will help you to draft a budget and understand when you are either exceeding or falling short of certain goals. If you are not already aware of advertising essentials such as SEO optimization or content creation, you may want to hire a freelance advertiser or firm. 

Investing in a website 

Costs: roughly £2,500+ for website design, £13 – £15 a month for hosting, and £29 – £200 a month for eCommerce capabilities

Before you even launch your company, you should have a website designed and launched. These days consumers and potential buyers do most of their research online before deciding to buy goods or services from a particular company. A good website is like a good first impression – it welcomes the individual and assures them that they are in good, competent, hands. 

It is worth investing in a website and buying your own domain because it helps to elevate the brand and the company as a whole. This does not mean that you need to invest a significant amount of money in your website, but it is definitely worth seeking out professional help, rather than trying to design the site yourself or relying on your Facebook page as a stand in for an actual website. 

These are a few of the most important hidden costs associated with launching a business in the UK, but there are definitely many others. It is always important to budget conservatively because you can never know what to expect, especially when you are just starting out.