Business start-up costs: the must-read guide

Business start-up costs: the must-read guide

The definitive, must-read guide to the costs you need to consider when starting a business.

Within this guide you’ll receive advice on the following types of costs incurred in setting up a business from scratch:

  • The definition of start-up costs
  • Fixed business costs – from premises and insurance costs to stock and staffing
  • Variable business costs – from cost of goods to wages and logistics

The definition of start-up costs

Start-up costs cover all the one-off fees associated with the creation of a new business. These outgoings can be grouped into two types of start-up spending:

  • Investigatory costs
    During the infancy of any start-up business it’s necessary for entrepreneurs to invest in researching the potential need for the business i.e. market research. Investigatory start-up charges cover analysis of existing comparable products on the market, transportation, labour supply, consultancy fees and expenses whilst doing deals with potential suppliers and distributors.
  • Pre-launch costs
    Start-ups must also factor in costs incurred once the decision has been officially made to launch and trade but before it is actually open for business. Such examples of typical pre-launch start-up costs include digital and traditional advertising in readiness for launch, office or studio furnishings and equipment, damage deposits with commercial property landlords, salaries for staff training and installation charges for digital infrastructure e.g. Wi-Fi.

However, it’s always worth bearing in mind that some of these start-up overheads are likely to roll into when the business is up and running.

Love what you do? Start up your own business in one of our temporary office spaces in central London


Types of business start-up costs

Once your business is up and running there will be two types of start-up costs that you record on the balance sheet – fixed and variable business costs.

Fixed costs relate to outgoings that must be paid regardless of whether the business turns over a profit. Businesses in all types of industry are going to experience different types of fixed business costs. Below, we list the most common fixed business costs which require payment no matter what happens to the business day-to-day.

Examples of fixed business costs

  • Professional fees
  • Insurance
  • Premises costs
  • Staffing and employment
  • Equipment and supplies
  • Stock
  • Sales and marketing
  • Finance
  • Technology costs

Professional fees

These may include the cost of hiring an accountant, solicitor, lawyer, or other expert professional to deal with the legal aspects of starting a business such as company formation, copyright protection, drafting partnership agreements or other fees you may need to pay to the Government for certificates and inspections for health and safety or food hygiene, for instance.

As an example, it’s possible to register online, by post using form IN01, or by using a third-party agent or software; but registration costs vary. Online applications cost just £12 and are usually registered within 24 hours. Meanwhile postal applications can take up to 8-10 days and cost £40. There’s also a same-day registration service which costs £100 where you have to submit your application to Companies House by 3pm.

Insurance costs for new businesses

It’s important to note that every type of new business will have slightly different priorities in terms of risk protection. A solid business insurance policy will protect your business should anything go wrong, ensuring compensation and covering legal costs.

Some of the typical types of insurances for business start-ups include:

  • Employers’ liability insurance
    The only type of business insurance that’s a legal requirement if you employ anyone. Businesses can be fined up to £2,500 for every single day they don’t have this protection in place. It’s designed to protect any compensation claims made by employees for injuries or physical damage caused at work.
  • Professional indemnity insurance
    This covers your business in the event of any compensation claims made by a client or member of the public in the event they believe you’ve made a mistake at work i.e. breaching confidentiality agreements or copyright infringement.
  • Public and product liability insurance
    If your business works closely with or in the public eye or your customers come to your premises this protection covers your business in the event of compensation claims made by someone who believes injury or damage was caused by your business. Similarly, product liability cover guards your business in the event a product you sell causes injury or damage to a member of the public.
  • Building and contents insurance
    Whether you rent an office or studio, or a workshop or a shop front, it’s your responsibility to cover the value of the contents within your workplace. Additionally, if you own your premises you’ll have to insure the building itself too as part of the terms of your mortgage.

Premises costs

Renting or leasing commercial property will include monthly costs that you should factor into your regular outgoings. Service charges and connection of utilities, followed by utility bills (electricity, gas, water, telephone) will also ned to be considered.

The premises may not be exactly to your working requirements, so if a refit is necessary make sure you have enough funds in the back pocket to decorate and furnish the property to your needs.

Staffing and employment

There are a wealth of staffing options available to business start-ups, from full-time employees to freelance contractors. You will need to decide which options are the best financial fit for your business; is your income already at a level that the business can handle a full-time wage? Would you prefer the flexibility of hiring freelancers as and when you need them? These are some of the questions you will need to ask yourself when the time comes to think about staffing.

In terms of recruitment, there will also be fees payable to agencies if you source new talent through these channels as opposed to fielding direct applications. Advertising job vacancies will also come at a price if advertising externally as well as internally on your own website.

Equipment and supplies

There are many essential first-day purchases for a start-up’s office:

  • Telephony
  • Internet connection
  • Data storage and back-up
  • Computers/laptops
  • Table for meetings/conferences
  • Comfortable computer chairs
  • Stationery
  • Signage
  • First aid supplies
  • Power cables/extension cords
  • Accounting system


If you’re a retailer that’s going to be reliant on stock, the first thing you need to do is ascertain the best possible suppliers and manufacturers to establish friendly working relationships with.

In terms of supplier credit, it’s an easy trap for start-ups to fall into attempting to buy too much at once without ultimately knowing what sells most and for the highest margins. Some businesses also get nasty surprises from their wholesalers, particularly if they experience times of financial hardship themselves, resulting in them asking you to pay them back in full much sooner than you had hoped.

Be realistic with your initial orders and allow your business to test the water without too much financial pressure.

Sales and marketing

Marketing and promoting a new business is almost a non-stop task. Digital marketing increasingly forms the basis of many start-up’s efforts to attract and retain customers, through paid advertising that allows you to be visible for related keyword terms within major search engines for a set budget and organic marketing which is a mixture of online PR and content creation about your products and services.

Those with a database of potential customers or existing leads can also invest in email marketing to distribute highly-targeted emails to grow exposure, but this also comes at a cost for distributing emails at high volume.

It’s almost unheard of for businesses today not to have a website; so whether you design your own website or pay a freelancer or an agency to design one for you, you’ll need to factor in time and money to develop an online presence.

Finance for start-ups

Another fixed cost that’s often unavoidable for ambitious businesses is the repayment of business loans or finance. For entrepreneurs without a bottomless pit of money to invest, equity and debt finance options are becoming increasingly popular with New and Growing Companies.

Our partners, Informed Funding are the UK’s largest online funding platform of its kind, connecting our customers with all types of funding providers, giving them the flexibility to grow and either sell shares in their business or repay the finance that is offered.

Technology expenses

In addition, there are a growing list of other tech expenses you should be aware of when setting up your business:

  • Software licenses
  • IT support
  • Website hosting
  • Data storage
  • Email accounts
  • Mobile phone contracts
  • Payment gateways
  • Any third-party integrations or services

Love what you do? Start up your own business in one of our flexible office spaces in London

Examples of variable business costs

The difference between fixed and variable business costs is that the latter change in line with sales or production volume. As production increases, variable business costs rise with it. Variable costs include direct material costs and direct labour costs that are essential to carry out the work required.

  • Individual product cost
  • Delivery
  • Staff wages

Individual product costs

For businesses that must deal with suppliers for their goods, individual product costs can vary on a sliding scale format, largely depending on quantity. Generally, the more you buy of a product from a supplier or wholesaler, the less you’ll pay per item.

Those businesses most reliant on raw materials to help create their finished product will have more variable costs than other firms.


In terms of packaging and shipping, delivery is another key variable business cost. As a business moves more of a specific product, the costs for its packaging and transport will increase with it. Conversely, during times when fewer products are sold, delivery and packaging costs will consequently diminish.

Staff wages

Wages can be placed in both variable and fixed business costs sections. For instance, if a business hires employees that are only paid if they work billable hours, this is regarded as a variable cost. However, if they are paid fixed monthly salaries no matter how many hours they work, this is a fixed business cost.

Businesses in their infancy should work hard to keep fixed and variable start-up costs to a minimum, simply because you’ll need to earn less to break even. It’s good discipline regardless to avoid overspending and purchasing things your business doesn’t urgently need. With a low-cost base, your chances of long-term success as a New and Growing Company are that much greater.

Find your perfect Workspace
Home to London’s brightest businesses. 60 iconic properties throughout the capital, from Chiswick to Camden, Waterloo to Whitechapel.
Find your perfect Workspace
Home to London’s brightest businesses. 60 iconic properties throughout the capital, from Chiswick to Camden, Waterloo to Whitechapel.

Related Articles

Introduction to consumer psychology

Introduction to consumer psychology

Consumer psychology refers to the processes used by clients and customers to select, purchase, use and discard products and services. In the business world, it helps firms improve their products, services and marketing strategies in order to bolster sales. Consumer psychology is a growing discipline, fuelled by corporate interest and corporate-backed studies.
20 January 2023 | Marketing
Call to enquire about our spaces and meeting rooms
0203 944 7630 Mon-Fri 9am-5.30pm
Call our friendly team

Mon-Fri 9am-5.30pm