Sometimes a great idea just isn’t enough. If you haven’t got the funds to back it, you’re in trouble. You might start a business assuming it’s going to cost X amount, only to discover it’s actually going to cost the rest of the alphabet too! When considering beginning a new business, we all want to know what it’s really going to cost us. Being inundated with information is not only baffling, it’s terrifying.
You need to take a step back, evaluate every aspect of what goes into making a business and see what it’s going to cost. Although there’s no exact figure, some careful research and planning can help.
How much does actually forming a business cost?
Company formation fees will be the same no matter what industry you’re in. The only differences depend on how you want to trade.
To become a limited company you’ll pay an incorporation fee to HMRC.
To become a sole trader you don’t need to pay any fees, although how you trade will be different.
Premises will be one of the largest expenses for any small business so if you’re able to work from home, take full advantage. However, don’t compromise your professional image by working from home when you really need an office.
Although a costly expense, premises will be the hub of your business and can emphasise your company values. Don’t skimp on somewhere cheap. Instead, make sure you weigh up business image and price before making a final decision.
What stock and equipment will you need?
For retail businesses, stock will be another of the largest payments you’ll have to make. It’s a good idea to shop around for the best deal on this one, as suppliers offer discounts or credit. Take full advantage of any bargains you can get your hands on before you splurge.
If you work in an industry like construction you’ll spend a lot on tools and equipment. This is where really can’t skimp. Ensure the tools are of a good quality and from a reputable company so that you can complete work to a high quality. They’re also more likely to last longer.
Strike the perfect balance between quality and price, keeping in mind your company values. This is where you’ll spend as little as possible but know your customers will be happy and your business will profit from the bulk expense in the future.
With all the other expenses of building a business, insurance tends to be the area companies are willing to sacrifice. Getting the minimum third party insurance might be a good idea for some companies, but this isn’t a one size fits all kind of deal.
Consider all the different types of insurance and pick the ones that apply to your company – this will ensure you’re covered in the best way possible.
There’s plenty of liability insurance covers to consider. These include; employers, public, product, professional indemnity, key man cover, business interruption and goods in transit.
These insurances cover a large range of incidents that may occur, and some may apply more to your business than others. Check out the full list of insurances here to see which you need.
Properties and Buildings Insurance
If you’re building is in a flood risk area you should definitely invest in properties and building insurance. If you’re not too sure, you should do it anyway. Buildings and contents can be insured against fire, lightning, gas explosion and boilers to name just a few.
The business premises should be insured for their full rebuilding cost and not just market value. To get this figured you may need expert advice.
‘All risks’ insurance also covers accidental damage or loss. However, ‘all risks’ won’t cover general wear and tear or electrical or mechanical breakdown and gradual deterioration.
Buildings Assets and Equipment (Contents Insurance)
For retailers, getting your stock covered in insurance is a must. It should be insured for the original cost, without profit added. If you need to insure business equipment this can be done through either ‘replacement as new’ insurance or ‘indemnity’. If you choose the latter they’ll take into account any wear and tear.
Contents are covered as long as there has been forcible entry to the premises. Damage to the building may also be legible for cover.
Will you need to travel?
In your first few weeks before you begin trading you’ll need to build relationships with clients and suppliers, which might mean travelling to meet them in person. While you’ll want to do anything to get them on your good side, you might be wondering how much all this to-ing and fro-ing is costing your business.
This will depend on how you travel. For example we wouldn’t recommend turning up to your first business meeting via private jet, no matter how badly you want to create a good impression. Be smart about travelling and book in advance.
The next step is to find out whether you can claim for travel expenses. If you’re using a personal car and want to use it for dual purpose (both personal and business use) you can claim per mile travelled for the business. Watch our video about claiming expenses in your business.
How much you spend on marketing your small business is really up to you. Bear in mind that the more you spend on marketing now, the more interest you’ll generate. Word of mouth marketing is your best friend as a start up, so don’t shy away from getting the word out before your business even opens. Have a grand opening with some free drinks to get people talking about your company.
When starting a small business it’s vital that you keep a clear record of all your accounts and retain relevant information that you’ll need in the future. This can be a lengthy and drawn out process that takes up most of your evenings and weekends.
When you’re working to set up a company you might not have as much time as you’d like to settle down and get your head stuck into those counts on a weekly basis. Hiring an accountant can be a massive time saver and will save you from having to get your head the constantly changing legislation.
Talk to one of the team about our online accountancy services for startups. Call 020 3355 4047, or hit the live chat button on screen.
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About The Author
A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.