What costs are there when starting a new business?
Starting a new business is likely to be one of the most exhilarating, exhausting and scary enterprises you will ever undertake. Statistics vary, but it’s generally accepted that at least 50% of new UK businesses will fail within the first five years and the number one cause of their failure is cash flow. It’s crucial that any new business is able to sustain its running costs, not all of which are obvious. Here are some key costs to consider if you are going to make your business one of the survivors.
Licensing
Businesses such as Child Care, Dog Breeding, Goods Haulage and a wide range of others will need a licence, the cost of which and the frequency of renewal will vary.
Insurance
It is a legal requirement to have Employer’s Liability Insurance, which protects you against the cost of compensation if one of your employees is injured or falls ill whilst working for you. You should also at least consider other insurances such as Public Liability Insurance, Professional Indemnity Insurance, Business Interruption Insurance, Key Person Insurance and Cyber Insurance. Though, all of which of course will add to your day-to-day running costs, but could save you money in the case of an accident.
Your Bank Account
You are not legally required to have a specific business bank account if you run a business in the UK, however it is absolutely necessary in order to ensure clean accounts. Business loans are also necessary to fund growth, but their cost needs to be factored in to your running costs. Many new businesses are subsidised by the personal savings of the founder. Putting your money into a savings account will ensure that you have a financial safety net whilst helping to grow your money in the meantime.
Equipment
Buying equipment in bulk, and buying used equipment, where appropriate, will help keep costs down.
Office Space
Of course you want an office, it makes your business seem more real but renting office space is an additional monthly expense and on top of rent there will also be heating and lighting costs. Many businesses move into an office far too soon. Keeping to your study room is advised for as long as possible, although this does depend largely on your industry. Rather than getting your own office, you could see if you could office share or work from an office hub.
Don’t over-borrow initially
Whilst it may be tempting to opt for a large loan, to try and get the ball rolling, high interest repayments are often the cause of the cash flow problems that kill so many new businesses. Many small business owners use crowd funding methods, or pension-led funding, both of which can be used to unlock the funding of your business needs, but as in all things relating to starting up a new business, they should not be entered into without thorough research.
