Ultimate guide to business startup costs

Customisable business insurance
01 April 2022
10 minute read

Setting up a business is exciting – but it can also be very stressful and occasionally overwhelming. It doesn’t take long to realise that you’ve got a lot more to do than you might have expected, in order to get your idea off the ground.

Launching yourself into the marketplace takes capital, and many new businesses struggle with startup costs. With this in mind, it helps to know what sort of essential things you’ll need to budget for, before you spend it on shiny new toys.

To help you be prepared as possible, here’s our ultimate guide to startup costs:

Overall Costs

What are startup costs?

Put simply, ‘startup costs’ cover the expenditure you’ll need to shell out in order to get your burgeoning business into a market-ready position. Exactly how much it costs you to set up a company will vary considerably depending on the nature and location of your business. Digital enterprises operating out of a co-working space won’t have the furniture, comms, and premises costs that a manufacturing business in a rented unit will, for example. However, there are several common costs which almost every start-up will have to deal with in one form or another.

Fixed costs and variable costs – what’s the difference?

First things first, for any business you’ll have some costs that are fixed, and others that are variable. It’s easy to confuse fixed/variable costs with initial outlay/ongoing costs when in fact your fixed and variable costs can come in as either an aspect of your initial capital spend, or as ongoing spending. Simply put:

  • Fixed costs remain roughly the same no matter what happens. Examples of fixed costs include business rates, rents, fixed-contract staff wages, insurance and so on.
  • Variable costs ebb and flow with the amount you’re producing and the what you need to grow. Examples include shift workers, freelancer hire, delivery charges, and differing spend on materials, stationary etc.


Initial paperwork

In the early stages of setting up your business, you really have to grit your teeth and open your wallet. As they say, you've got to spend money to make money, and the costs begin before you even get started. Here’s a quick run-through of the main paperwork you may need to shell out on before you can launch:

Exploratory costs

This includes market research, advertising for staff, pre-launch publicity and so on. Note that it will also take you some time to find premises and employees, which may eat into your budget.

Registration and licensing fees

Plenty of things come under the heading of ‘Registration fees’, including:

  • Business registration – if you’re intending to trade as a limited company, you’ll need to register with the government. It only costs £12 to do so, but it still needs to be factored in.
  • Software licences and registration fees – depending on the kind of software you’re using, registration and licences may apply.
  • Business licences – some services require a license. For example, anything concerning the manufacture or sale of alcohol is licensed to the hilt. You’ll also need a licence if you want to offer live entertainment, serve or prepare foodstuffs, and more. We reccommend thoroughly reading the government's list of license-proscribed activities before starting your business and exploring what conditions are attached to any licenses. Sometimes getting these licenses can be costly, involving training, the purchase of necessary equipment, and admin fees.
  • Guild or association registration – many professions have accreditation processes, guilds, or associations. Membership of these organisations and accreditation programs lends credibility to your business. While you might not have to begin the process of joining a guild right at the get-go, it’s worth looking into the possibilities as early as possible.

Training and certification

In fairness, there’s a degree of overlap between ‘training’ and ‘licensing’. Some licenses – alcohol licenses, for example – require you to complete the licensing board’s training program. Food hygiene certifications and other health and safety necessities may also involve mandatory training.



We could go on for days about the types of business insurance you definitely need, the cover you might need, and that which could come in handy, depending on what you do. Exactly how much insurance is going to cost you depends greatly on what that business does and the risks you face, but here are a few of the big hitters:

  • Employers' liability – this is required by law if you’re going to have people working for you, and The Health and Safety Executive will fine you heavily if you don’t have it (up to £2,500 per day). But fines aside, it’s also very much worth getting, as it protects your business should any of your employees get sick or have an accident at work.
  • Professional indemnity – PI insurance is for businesses offering professional or advisory services. It covers your back in the event that a client suffers a financial loss or reputational damage as a result of your work or advice.
  • Public liability – public liability insurance will cover your costs (legal and compensatory) if your business causes property damage or injury to a member of the public.
  • Business equipment – business equipment cover will help you to recoup your losses if your business' belongings are damaged or stolen, including items such as laptops and phones.
  • Cyber – it might not immediately spring to mind, but cyber liability insurance is becoming more and more important as the threat of cyber-attacks and data breaches increases. If you hold client's personal data or your take payments via card payment, you should consider cyber liability.

Office Move

Fixtures and Fittings

Alongside all that paperwork, you also have the physical side of your business to think about. As we mentioned earlier, you can keep fixtures and fittings costs to a minimum by operating from a co-working space or serviced offices, where these will usually be included in your monthly fee. However, co-working may not be suitable for every business. If you need more space, privacy or a more specialist workspace, you’ll need to factor in the following:

Premises costs

If you’re taking up permanent offices or other premises, you’ll probably find this one of the biggest shocks to your bank balance. As a one-off outlay, you’ll have to make down-payments or deposits on your new premises, as well as pay for surveys and all the other things which may crop up when taking on a new piece of real estate. On an ongoing basis, the rent on your premises will need to be factored into your monthly budget.


Desks, chairs, whiteboards, lamps, fridges... you’ll probably find that new necessities crop up as you go along. So, don’t go overboard in kitting out your place with fancy décor right from the start. Stick to the basics initially and accessorise later.

Production equipment

From crafting tools to specialist machinery, this element varies massively depending on the nature of your business and premises.


If your work involves making lots of deliveries, do you need to invest in company vehicles or can you outsource to a delivery company? Be aware that if you’re using your own (or an employee’s) vehicle regularly to make deliveries, it still has to be insured for that purpose.

IT infrastructure

Installing your IT infrastructure could be as simple as getting a modem and connecting some PCs, or it could be a more complicated matter of wiring in data cables or setting up automated processes and remote monitoring systems. Make sure that you get a full quote from a reputable IT company for everything that needs doing. A tip-top IT network is essential to the success of most modern businesses and will also ensure you’re well protected against cyber-attacks and data breaches.

Comms infrastructure

A lot of ‘comms’ comes under the ‘IT’ heading these days, but there’s a bit more to it than just emails. You’ll probably need a landline phone installed in your office, and mobile phones for some, if not all, of your staff. What about a mail room with a franking machine? Don’t forget the analogue options – they’re still necessary for many businesses!


Ongoing costs

Moving forward, you’ll settle into the daily, weekly, and monthly rollover of ongoing costs. Some of these are fixed, some are variable – the thing they have in common is that they are likely to recur as your business progresses. Of course, you may have to make one-off payments for things like renovations and rebrands during the course of your business' life, but these aren’t regular or recurring events (we hope!)


While the rent for your premises may fluctuate in accordance with the property market, it is at least generally predictable. Office space in desirable areas of a city, with good transport links and close to other business hubs will inevitably come at a premium so choosing where to set up is crucial.

Business rates

Business rates are a tax on property used for business purposes and, similar to rent, they’re a predictable ongoing bill.

In the aftermath of the Covid-19 pandemic, the UK government introduced a scheme of business rates relief for small and medium businesses. In the 2022/23 tax year, this takes the form of a 50% relief on business rates for eligible retail, hospitality, and leisure properties. What's more, the business rates multipliers will be frozen.


Lots and lots of things operate on a subscription basis these days. As well as membership to any industry organisations, you’ll probably also have to pay subscriptions for things like software, cloud storage, trade magazines, streaming services, digital platforms, and more. What these are will depend hugely on the industry you operate in, but they can give you a serious competitive advantage, so are often worth investing in.

Utility costs

These may vary depending on the deal you have with your utility companies, and the amount of electricity etc. you use. You may wish to shop around for bargains and potentially sign a longer-term deal with an energy supplier to get the best commercial tariff. You can learn more by reading our guide to how small businesses can handle the rising cost of energy.


We've addresses the set-up costs of your communications infrastructure above, but once you're set up, there will be ongoing costs related to your business' telecomms, including phone tariffs and commercial broadband packages.


How you pay your staff can either be fixed or variable, depending on the type of contract you’ve entered into with your employees. If you pay by the hour (or the day in the case of freelancers), your wage bill will be variable. If you pay based on annual salaries, they’ll be fixed. There are also plenty of rules that exist surrounding the minimum wages that your business will need to offer to workers of different ages and you can learn more about this by reading our guide to the National Minimum Wage.

It is important to factor in the additional cost to your startup of paying employers' National Insurance contributions (NICs) on top of the wages you pay your staff. We cover everything you need to know about how National Insurance contributions are changing in 2022 in our guide to the NIC rate rise for small businesses.

Stock and Materials

If you’re selling a physical product, the stock is likely to be one of your biggest outgoings and a regular ongoing cost. And remember that as well as products and raw materials, you’ll also need internal stock – stuff like stationary, uniforms, branded collateral and so on. Factor in delivery costs when budgeting for these.

Covering the basics

Branding and advertising

The importance of defining your brand identity and promoting your business amongst the right people can’t be overstated, so you need to factor this in. Paying for specialist design and marketing services really can cost as little or as much as you want, but it’s worth remembering that you tend to get what you pay for!


Getting out there and meeting people is one of the best ways to raise your profile and bring in new clients, but it costs money. Travel, entertaining, venue rental – it all adds up. Setting a monthly budget for these kinds of expenses ensures you’re not tempted to go overboard.

Professional services

You may have regular professional services to invest in, such as accountancy or legal advice, to help manage your finances, draw up contracts and provide expert knowledge on the ins and outs of running a business. You may also periodically hire professionals on a one-off basis, and be invoiced, so consider what these costs might be.

Staff expenses

It’s a rare employee indeed who’ll consent to pay for their own hotel room during a training weekend! You can’t expect your staff to pay for your business out of their own pockets, so things like travel and accommodation will also need to be categorised under ‘business expenses’.

Employee benefits

Let’s not forget the Christmas party! Employee benefits can be extensive – pensions, gym memberships, health insurance, or as simple as the odd lunch in the local – but you still need to factor them in.

Covering the basics

We’ve covered the basics above, but the precise price of starting a new company will, of course, vary enormously depending on what you’re doing, where you're doing it, and how many people are helping you along the way. But the sooner you sit down and work out exactly what you need to factor in, the faster you can focus on making money rather than spending it.

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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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