Opening a shop: 6 startup costs to consider

Customisable business insurance
06 October 2021
7 minute read

The costs involved in setting up a business depend on a huge variety of factors, from your location, to the originality of your product and from the state of your industry to the wider state of the economy.

For aspiring shop owners, the cost to cover the first year of a retail store’s life are estimated to be, on average, around £172,000 according to research by

However, because of the variables at play, it is impossible to say definitively how much it costs to open a shop. You will need to consider various elements of costing when assessing the likely overheads of opening your own shop and understand exactly what you get for that capital outlay.

So, read on to discover what costs you should consider when setting up a shop in the UK.

Rent and business rates

This may seem like a rather obvious inclusion in the checklist of shop set-up costs; the cost of the actual shop premises themselves.

There are two major costs to consider when working out how much money you will need to pay for your premises: rent and business rates.

  • Rent - This is the amount paid (usually monthly) to the owner of the property for the right to occupy and use the physical premises. Much like in a residential property, certain rules exist surrounding how much a landlord can increase your rent by each year, and this will be subject to your rental contract.
  • Business rates - Most shops are subject to paying business rates to their local council, at an amount directed by the central UK government. This is calculated via a ‘multiplier’ which usually sits at around 50% of the rental value of the property. For example, if your rent (or rateable value) is £3,000 per month, then your business rates will be approximately £1,500 per month on top of your rent.

There are certain properties and business types that are exempt from paying business rates and the UK government periodically announces major business rate relief programmes to help stimulate small business growth.

For example, during the global Covid-19 pandemic, all shops, restaurants, bars, performance venues, gyms and hotels enjoyed 100% business rates relief and this now continues at a 66% rate discount until March 2022.

Even looking beyond the Covid pandemic, it is worth investigating the various types of rates relief available, especially for small businesses, as a way to save your business significant amounts of money while setting up.

Stock, inventory and setting prices

To give your new shop the best chance of success, you should be prepared to hit the ground running from the moment you open your doors, and this means having a well-stocked inventory of products ready to sell.

Finding the balance of the perfect amount of stock to hold at any one time is difficult for a new retail business, especially if your stock is perishable and requires a specialist system of inventory management. Insufficient inventory will lead to empty shelf space and lost revenue, while too much stock can lead to a backlog in acquiring and selling new products.

RetailWire reports that over and under stocking costs the global retail economy over $1 trillion US dollars per year, with over stocking losing businesses 3.2% of their revenue and under stocking accounting for 4.1% losses. In short, getting your costing and budgeting for stock right as you set up your shop can save you money in the long term.

To shift your stock at the right pace will require you to know what price to set, which is based on market research and benchmarking against competitors.

How much money you spend initially on stock as you set up your shop will depend on your industry and how much you intend to sell that stock for to customers. Retail markup is usually around 30% to 40%, though this depends on the type of product you’re selling. Luxury items can demand a larger markup while everyday basics will have a slimmer profit margin.

Learn about stocktaking and inventory management with our ultimate guide.

Business insurance

Opening a shop will always entail certain elements of risk, including unexpected events interrupting your business practice, delays in your supply chain, cyber attacks that target your card payment systems, faulty products and issues with your employees.

But business insurance may help mitigate against the risks that your new business could face:

  • Public liability insurance - Cover for legal and compensation costs relating to any claim made against your retail business due to injury or property damage inflicted on a non-employee. This could include a customer entering your shop or a delivery driver dropping off stock.
  • Product liability insurance - Covers legal and compensation costs arising from injury or damage caused by your products, such as an electrical product that malfunctions and causes a fire hazard.
  • Cyber insurance - Protects your shop from losses sustained through cybercrime, such as hacking of your card payment system.
  • Employers’ liability insurance - Legally required cover for most businesses which have employees, covering instances such as a shop staff member suing after they are injured while stacking shelves.
  • Buildings, contents and stock cover - Covers your equipment, stock and electronic devices against theft or damage in the event of a break-in, fire or flood at your shop.
  • Commercial legal protection - Allows small businesses such as an independent shop to cover any legal proceedings as easily as a large organisation with an in-house legal team

Find out more about customisable [shop insurance]((/business-insurance/industries/shops-and-retail-insurance/) from Superscript.


Every business has certain obligations with regards to filing tax returns and company accounts with Companies House every year. There is then also the more everyday task of keeping records of transactions, receipts and all incomings and outgoings.

For a small shop or pop-up, this task can be done without the professional expertise of an accountant. However, for any retail business with significant cash flow, high turnover and employees on the books, the task of preparing and filing company accounts and managing day-to-day accounting tasks becomes much harder.

While there is no legal requirement to hire an accountant, their services can be invaluable to a new retail business hoping to establish in the market and grow sustainably. For the services of an accountant or accountancy firm to work once a year to prepare and file all the necessary paperwork with HMRC and Companies House, the cost should be somewhere in the region of £250-£500.

Read our guide to whether or not you should invest in the services of an accountant for your small business.


The costs of HR depend very much on the size of your enterprise. If you plan on opening a small shop or cafe by yourself or with a business partner, then you will not need to consider the costs involved in payroll for your staff.

However, as soon as your shop is of a size where you need to take on additional staff to run the day-to-day operations, man the tills and control the flow of stock, you’ll encounter some additional costs.

  • Employee payroll - The expected salary of a full time retail worker will depend significantly on the hours they work, their experience and the level of responsibility you confer them with. However, the average (median) shop worker’s salary (according to research by is £22,009.
  • Employers' liability insurance - Any business that employs staff (full-time, temporary or contract) is mandated by UK law to take out employers' liability insurance. This covers your company’s legal expenses and compensation costs if an employee becomes ill or is injured as a result of doing their job.


Marketing is often considered a secondary cost by many new shop owners, but it is a crucial element in getting your retail store off the ground and should be factored into your startup budget. There are a number of avenues that you can funnel a marketing budget into when opening a shop, and how much money you dedicate to each will depend on your shop and product type, as well as the location and how saturated the specific industry is.

Far from being a secondary cost for new shops, as a general rule, new shops will have to dedicate a larger proportion of their gross revenue on marketing than established retail businesses do. Research published by the challenger business bank, Tide, suggests that the ideal marketing budget for a new business should fall between 12% and 20% of gross revenue in the first year, before falling to between 6% and 12% after that.

The kind of areas that new retail shops may wish to consider spending their marketing budget on include:

  • Traditional broadcast advertising (ie. local radio)
  • Google advertising (both search and shopping streams)
  • Online and print in relevant publications (ie. industry magazines or local newspapers)
  • Flyers and posters in the local area
  • Setting up a website and SEO optimisation

Time to get your shop up and running

So, there you have it, a guide to the various areas that you should consider when estimating how much it will cost to set up your shop and get your retail business off the ground.

The reality is that in a complex and ever-changing business world, this list of costs is not exhaustive. There will be hidden costs and unexpected expenses along the way that you need to budget for.

Ultimately, if you have written a strong business plan that accounts for a variety of eventualities and forecasts your own growth realistically, with well-researched estimates of various costs along the way, you’re halfway there to opening your dream shop.

For more help, read our ultimate guide to writing a business plan and good luck with opening your shop!

This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.

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