Business expenses

Business Start-Up Costs : What to Expect When Starting a Business

Gregoire Serre

Gregoire Serre

Financial analyst

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Any athlete who wants to win a race will make sure they are fully prepared before they hit the starting line. The same is true for a would-be business owner. To ensure the longevity and success of any type of business venture, you need to be as prepared as you can be before you even start to think about opening your doors to the public. One of the first steps that a new entrepreneur should take is to compile a thorough list of all the business start-up costs they may incur. 

Creating a lucrative small business requires planning and precise accounting. Knowing exactly what business start-up costs you might encounter will help you to create a budget that covers any eventuality. Keep reading to find out more about what business start-up costs you may have to budget for.


What are business start-up costs?



You can define business start-up costs as any type of expense that is related to creating a new business enterprise. Since every type of business is unique, pinning down exact business start-up costs can be difficult. Some fees may need to be paid every month, some costs must be paid once a year and others need to be paid just once during the life of a business. 


There are, however, some general costs that most business owners can expect to have to pay when they are starting out. Having a broad idea of what these costs are can help you to create a precisely defined list of costs that relate to your business. You will then be able to calculate an estimate of how much funding you will need to stay solvent during the hectic start-up period. 



What different types of business start-up costs are there?



It can be helpful to categorise your business start-up costs into different categories. The first two categories of business start-up costs are:

  • Investigatory costs – Any expenditure related to market research to test the viability of your new business
  • Pre-launch costs – Costs incurred when the decision to launch a business has been made but it is not yet trading. These include advertising, furnishings, training courses and so on


Furthermore, new business owners can categorise all of their costs into two groups

  • Fixed costs – Ongoing costs related to producing goods or providing services. These costs remain stable over time
  • Variable costs – Short- or medium-term costs not related to producing goods or providing services. These costs can fluctuate within a short time frame


Let’s now take a look at some of the most common business start-up costs that new businesses in the UK can expect to encounter.



Business plan costs



Writing a detailed business plan is an essential part of starting any new enterprise. New business owners should set aside funds for the research and preparatory costs involved in creating a solid business plan.



Research and investigatory expenses



These costs relate to anything you do to research your business and investigate the market. This includes market research surveys and interviews, analysing your competitors and researching and securing suppliers. 



Borrowing and financing costs



Most new business owners are going to require a pool of funds from which they draw on to get their enterprise off the ground. These funds, however, can also incur start-up costs of their own, such as the interest payments due on any initial loans. 






Insurance is a fact of life for business owners. Depending on the type of business you are about to open will determine how much insurance you need to pay. Most business owners take out professional indemnity insurance to protect themselves if a member of the public brings a lawsuit against them. Likewise, some business owners may require public and product liability insurance and building and contents insurance. If you are going to have employees, you will need to pay employers’ liability insurance. 



Registration and licensing costs



If you have decided to register a company or your business requires certain business permits or licenses to operate, then these costs will need to be researched and included in your budget. If you fail to obtain the right permits or licenses or do not register as the right type of business, you may face financial penalties or even legal action in the future. 



Technological costs



When they first start out, many businesses require a significant investment in point of sale (POS) technology so they can easily and securely take all types of payments from their customers. Other technology-related costs include investments in accounting software, a website for the business that incorporates e-commerce and information systems for daily operations. No modern business can operate at its full potential without taking advantage of the latest technology. Investing in IT right from the start is sure to help your business in the long run.



Costs related to equipment and supplies



No matter what type of business you are in, you will need certain types of equipment and supplies. From furniture to computers, raw materials to telecommunications sets, shelving to desks, all business owners need to carefully calculate exactly what equipment and supplies they need to set up shop properly.  



Marketing, advertising and promotion



Every new business needs to get the word out about itself before the doors open. These days marketing and advertising entail detailed, carefully planned digital marketing strategies as well as newspaper advertisements, billboards, leaflets and more. Your budget needs to allocate a significant portion of funds towards making sure the public knows you are out there.



Labour costs



If your business is going to employ people, then as well as the associated insurance you will need to plan for all your other labour costs. Labour costs include the wages of your employees, any overtime they may accrue, sick pay, payroll taxes, contributions to retirement plans and other such benefits.


Additionally, labour costs will include expenses related to the hiring of your employees as well as bonuses, entertainment for staff (such as Christmas parties) and the cost of any kind of perks given to boost morale. 



Unexpected costs



Successful business owners know that there is always the chance that something they didn’t plan for will occur. No matter how much thought you put into planning, there is always the chance that an unexpected event will happen. Many businesses fail because they did not set aside funds to cover an expense they overlooked or an expense that could not have been predicted. 


Some new business owners are hit with lawsuits regarding copyright infringement or face legal problems regarding their business premises. These types of unforeseen costs can turn out to be substantial. To ensure that you do not get caught by surprise, set aside some money to pay for unexpected costs. If the funds are not needed, you will have an extra windfall! 



How to find funding for your business start-up costs



Securing funds isn’t always an easy task for people who want to start a business. Many traditional lenders are not eager to give loans to businesses that do not have a proven track record of trading. Being designated as a ‘high-risk’ venture can be problematic. However, new business owners can secure capital for their start-up costs via other means. 


The UK government offers a range of loans specifically designed to assist entrepreneurs, partnerships and companies with business start-up costs. If you are based in the UK and are over the age of 18, then it may well be worth investigating these options. You can find a list of all current start-up loans available via the UK government’s website 


Other ways of covering your start-up costs include finding investors who are willing to back your business idea, taking out a loan from alternative lenders, borrowing from family members or using a personal loan to cover your initial business expenses


Managing the finances of any type of business requires diligence and precise accounting. Unfortunately, many new business owners simply do not have the time or the manpower to allocate enough time to properly look after their expenditures. Mooncard can provide you with the solutions you need to streamline your accounting processes. 


Mooncard can help you to manage your money by keeping track of all your business expenses. Every time you make a purchase using the Mooncard payment system, a digital photo of the invoice or receipt can be taken and sent to your accounting department. 


Mooncard’s system uses preloaded data to automatically issue an expense report, which is also sent to your accounting department. This makes it simple to keep a running tally of all your expenses and provides you with digitised records that can be accessed whenever you, your accountant or HMRC wishes. 


If you are interested in trying out the Mooncard system for yourself, you can book a free, no-obligation demonstration via our website today. 

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Gregoire Serre

Gregoire Serre

Grégoire Serre has been a financial analyst at Mooncard since 2021. He previously worked at Ernest & Young and Heineken, gaining solid experience in the finance and audit sectors. He is passionate about economics, accounting and entrepreneurship.