Guide to Typical Startup Expenses for Small Businesses and How to Minimise Them

If you’re looking to start a business in the UK, you know that it takes more than just a brilliant idea and some elbow grease: you need startup capital. Still, this doesn’t need to cost the earth: according to research by the Company Warehouse, the money needed to start a business in the UK is £5,000 on average. Over half of the entrepreneurs surveyed actually had less than this when starting their small business. A typical UK startup goes on to spend money to the amount of £22,756 in its first year, excluding costs related to business activities like product development. However, just under 40% of startups are still around 5 years later, according to the most recent ONS (Official for National Statistics) research.

In this guide, we’ll explore how much money is needed to start a business in the UK, as well as ways to minimise expenses for small business owners on a budget.

Estimated Costs to Start a Business in the UK: Industry Differences

What about typical startup expenses for small businesses in the UK? The figure of £22,576 cited above for how much money it costs to start a business in the UK is a broad average of costs involved with company formation, legal, accountancy, and HR. These can be easier to predict based on the company size, but startup costs will vary considerably depending on your business sector.

For instance, a freelance graphic designer creates digital products, so they will not need to spend thousands researching and patenting a physical prototype. This is why most creative and tech founders in the UK start a business with £1,000 or less. In fact, over two-thirds (67%) of designers and photographers had a startup budget of less than this.

Consultancy, transport, and event firms have higher startup costs. Typical startup expenditure in the UK for these sectors is £1,000 – £5,000.

Given the rising price of groceries, it’s hardly surprising that 75% of food startups have a budget of 5,000 to £10,000. This is also the case for 38% of property entrepreneurs, so be sure not to underestimate costs if you’re entering these sectors.

The most expensive sectors include finance and recruitment: over 75% have a startup budget of over £10,000. Retail, Health, and Leisure-focused startups have a reasonably even spread of startup budgets, investing £1,000 to over £10,000.

Types of Startup Costs

How much does it cost to start a business? As we’ve seen, some business sectors don’t neatly fall into a specific category, so this is a difficult question. Still, you can estimate some of your main costs to start a business in the UK. These include:

Equipment

How much money do you need to start a business when talking about equipment? Businesses can include more obvious items like computers, point-of-sale systems, and credit card terminals. Many office rentals come unfurnished, so you’ll also need to invest in your own chairs, desks, coffee machines, and so on.

These costs are ongoing, but upfront, you can expect to pay £300 – £2,000 in the UK.

Business Registration

In the UK, registering a business via Companies House or a third party is quite straightforward. Still, you’ll need to decide if you want to form a “Limited Liability Company,” a partnership, or just register as a sole trader.

Each approach for registering business entities has its pros and cons: for instance, Limited Liability (Ltd.) companies mean that your personal assets are safe if the business fails. On the downside, there are much stricter regulations surrounding how to file business finance reports. You’ll also need a valid UK address.

Technically, you can register a UK company yourself online. Still, a professional accountant is a smart investment here: they can help you select the right company model and prepare the paperwork for a fixed fee.

For these reasons, registering a UK company can cost anything from £12 – £100 upfront.

Inventory

It stands to reason that if you’re setting up a retail business, you’ll need to lay in stock. If you’re manufacturing products, you’ll also need access to raw materials in order to create them.

Striking a balance can be challenging: the more inventory you lay in, the greater the potential revenue. Still, if a product fails to sell, your money could be tied up in worthless goods.

If you’re starting a creative business like graphic design, video production, or copywriting, you may be tempted to ignore inventory as your products are virtual. Still, if you’re producing digital content, you need to consider how to store and back up your work.

All of the above comes at a price, which is why inventory for UK startups can cost anything from £500 – £1,000

Marketing

You can have the best product or service in the world, but it stands to reason you won’t make any sales if no one knows about it. Costs for this can vary: for the purposes of this guide, we’re focusing solely on online advertising.

Initial website registration costs are as little as £5, while ongoing site maintenance fees are around £30 per month. If you need a specialist web designer, fees will vary depending on your needs. Expect to pay £960 to £15,000 to have someone build your site.

Social Media sites like Instagram and Facebook allow you to set up a business page for free, as well as run “pay-per-click” ad campaigns. You can set a budget for this to keep charges under control. The more you pay, the greater your exposure, but typical costs for a UK startup are up to £320 per month for social media campaigns.

You can also create CPC (pay-per-click) ads for popular search engines like Google. Again, you can control the budget for this, but expect to pay £50 – £200 per month for a regular UK startup.

Utilities

This expense encompasses heating, electricity, phone, internet, water and so on. In the UK, businesses pay separate rates for utilities like electricity.

On average business spends in the UK are £60 – £200 per month for utilities, but you should check with your chosen provider for specific ongoing prices. There may also be one-off connection fees to be paid upfront.

Insurance

If you’ve formed a Limited Liability company, your personal assets usually can’t be seized to pay company debts. Still, insurance can give you some peace of mind in case the worst happens.

If you’re running any kind of business that admits members of the public or is high-risk, like construction, you will need PL (Public Liability) Insurance. This protects your company in case someone claims they were injured and/or lost valuable property when on your premises.

The average cost for UK startups is £50 – £500 per year.

Workspace

Whether you’re a one-person startup or looking to launch a multinational corporation, your chosen workspace can be one of your major expenses. The rise of remote work and hybrid work models has made it possible for companies to let employees work mostly or fully from home: according to research by Owl Labs, an astonishing 16% of companies worldwide now only hire remote workers. If you can do this, you can essentially eliminate workspace expenses.

If your business does require physical office space in the UK, the amount you spend will change depending on where you’re based. According to research by Statista, office space varies from £35.50 per square foot per month for Glasgow up to £125 per square foot per month for an office in London’s West End. Statista also demonstrates that retail rents are erratic depending on where you set up shop in the UK. Currently, a shop in Bristol costs just £85 per square foot per month, but this goes up to £2,000 per square foot for a Bond Street retail location in London’s West End.

This means workspace costs for a UK startup can be anything from £0 – £5,000.

How to minimise costs for starting a business in the UK

Some business expenses like registering your company are unavoidable. Still, saving money upfront makes sound business sense: if your product or service fails to take off, you’ll have the resources to try a different strategy.

Some ways to save cash include:

Build your own website

You have to pay to register a professional domain name. Still, many registrars also have built-in free tools to allow you to design the site to your needs and set up a payment portal using popular platforms like WordPress and Shopify. There are also third-party website builder tools like Wix and Squarespace, which have free tiers but expect to pay up to £320 per year for all website builder features.

Market Organically

Registering an account on popular websites like Facebook, X (Twitter), and Instagram is free. You can also create your own videos, blog content, and other creative content and distribute it free of charge via online channels. Building a customer base organically in this way means you’ll always have a receptive audience when new products or services are released.

Shop Around

Your business may be based in the UK, but it doesn’t automatically follow that you have to purchase all inventory and brand-new equipment from British retailers. Don’t be afraid to haggle with potential suppliers over prices and shipping costs.

If you require certain equipment, such as computers and furniture for your office, check for second-hand or refurbished goods from auction sites and charity shops. Make sure to use price comparison websites to check you’re also getting the best deals from your utility providers.

Promote Remote Work

As we’ve learned, renting a physical company premises in the UK means paying at least £35.50 per square foot per month in rental costs. You’ll also need to pay utility bills for heating, lighting and internet, as well as specific building insurance in case anyone is injured or property is damaged.

On the other hand, if you decide to join the 16% of companies worldwide that have opted only to employ remote workers, you can save on all of the above expenses. Remote teams are as productive as onsite employees: Researchers like Jose Maria Barrero have done detailed studies into remote work arrangements set up since 2020 and have discovered around a 5% boost in productivity.

In short, with minimal business startup costs and better employee productivity, there’s every reason to choose remote or hybrid work for your UK business startup.

How The Hoxton Mix Can Help

At the Hoxton Mix, we aim to help UK startups thrive. Most importantly, if you do create a company that employs only remote workers, we can provide you with an impressive London business address. That will cost from £0.41p per day, saving you hundreds per square foot on maintaining your own building.

If you prefer a hybrid business model for your startup, The Hoxton Mix is also here to help with events, conferences, and training sessions. Our London meeting rooms can be booked by the hour, so you only pay for workspaces as and when you need them.

Even if your remote workers are based outside the UK, there’s no reason why customers need to pay extra for calls. Simply sign up for a 020 London number through The Hoxton Mix and have calls diverted to any UK mobile or EU/US/UK landline.

The Hoxton Mix’s mail forwarding services also afford you the ability to truly work from anywhere while maintaining a UK presence. For instance, our “Scan Lite” plan means we’ll scan and email all your posts to you the same day you receive them.

Final Thoughts

Ultimately, your startup costs will be determined by your business sector, as well as your vision and goals. Although startup expenses can be as little as £1,000, with some careful research and determination, you can minimise the costs by doing some of the legwork yourself in website design, price negotiation, and organic marketing.

One of the best ways to improve your cash flow is to embrace remote work. This doesn’t have to mean using your home address to register your business or receive official post any more. The Hoxton Mix extends a helping hand to UK startups by offering London business addresses, remote work solutions, and cost-effective services to truly get your startup off the ground.

FAQ

How much money is typically needed for business startup costs in the UK?

The amount of money you need to start a business for an average UK startup is £5,000. However, how much money it costs to start a business varies by sector, with creative and tech startups often starting at £1,000 or less.

How much does it cost to register a business in the UK?

The costs of a business registration in the UK range from £12 to £100, depending on whether you choose the company model you choose. It’s best to find an accountant or other professional who specialises in business registration: they can help choose the right structure for your company and file the paperwork.

How can I minimise business expenses?

Estimate your business costs by researching your sector thoroughly, then try to negotiate the best prices for both equipment and inventory. Adopting a remote work model can save your company thousands on premises rental, utilities, and insurance. You can still enjoy an exclusive London address, mail forwarding, and renting meeting rooms and desks through The Hoxton Mix.