April 3, 2024
There is no simple answer to how much it costs to start a business. Costs vary widely depending on your industry, location, and what you sell.
However, to give you an idea, recent research shows that you’d need £22,756 on average to launch a business in the UK. This covers first-year essentials like incorporation, professional fees, and overheads.
While it’s a considerable investment, there are several ways to save money when starting a business. The UK’s top-rated company formation service, 1st Formations, will show you how.
Commercial office space is one of the most significant business expenses. Depending on your location and the space you need, you could be looking at around £40 to £150 per square foot.
However, traditional offices are often unnecessary for new companies. Typically, early-stage businesses operate remotely, with entrepreneurs either working from home or in co-working spaces. If you have the space available, working from home is the easiest and cheapest solution, as it won’t make a difference to your rent or mortgage payments.
Try a co-working space or serviced office if you can't work at home. These cheaper alternatives come ready with all the facilities you need to run your business – all you need to do is plug in your laptop.
Aside from saving you money, these options also offer networking opportunities.
If you’re concerned about the cost of marketing your new business, you’ll be pleased to hear that there are plenty of free tools to take advantage of. Here are some ideas:
Business Energy UK says micro-businesses (up to 10 employees) spend between £1,200 and £2,300 a year on gas and electricity. With the next energy price cap rise (of 6.4%) coming into effect on 1 April 2025, those costs will increase even further.
One solution that’s worth exploring is switching your utility provider. The UK energy market is competitive right now, so you may be able to find better rates with a different company.
Alternatively, the best way to save money on your business energy bills is simply to reduce your usage. Not only will this bring your costs down, but it’s better for the planet, too.
If you can, remove the gas supply in your home or office and switch to electric or renewable energy. Gas is a fossil fuel, and it’s more expensive as well as incredibly damaging to the environment.
Otherwise, implement simple daily habits that consume less energy. Turn the light off when you leave a room, shut down idle equipment, turn the thermostat down a degree or two, and don’t leave the tap running unnecessarily.
Bootstrapping is a common money-saving strategy for early-stage businesses. It involves injecting your personal savings and re-investing profits into your startup to fuel organic growth rather than securing formal investment or taking out bank loans.
While bootstrapping requires you to rely on your own resources, it means you don’t have to give up any equity in your company, and you avoid external debt. Without these financial pressures, bootstrapping makes you more cost-efficient and resourceful, allows you to focus on sustainable profitability, and reduces financial risk.
When you need to expand your workforce after starting a business, outsource certain operations before hiring internally. But, taking on in-house staff is expensive; it involves paying a salary, pension, and benefits. It also increases your office space requirements and ups your utility usage.
Instead, opt for freelancers or contractors for one-off tasks like design, content, or marketing projects. You’ll generally pay per hour or per job, which is a cheaper alternative and makes it easier to plan your business finances.
If you need help with customer support, partner with an external answering service. For instance, with 1st Formations’ sister company, Bizik, you’ll pay just £29.99 a month for bespoke, professional call and live chat handling instead of roughly £30,000 a year for an experienced in-house receptionist.
Company formation is another process you can outsource and enjoy better value for money. Rather than paying £300-£400 for an accountant to handle your incorporation application, register your business with 1st Formations. Packages start at just £52.99 and include the Companies House filing fee, a free business bank account, filing your first confirmation statement, and more.
Electrical equipment and office furniture will be one of your main expenses when starting a business. We recommend buying second-hand unless you need specific tools or machinery to deliver your products or services.
You'll find refurbished mobile phones and laptops in excellent condition at a fraction of the price of new ones. Many manufacturers, such as Apple, offer these services directly. You can also visit electronic stores and online marketplaces for low-cost second-hand equipment.
If you need office furniture like desks and chairs, charity shops and furniture outlet stores are worth a visit. Also, check platforms like Facebook Marketplace, where users often give items away for free.
Buying second-hand business equipment is a highly effective way to save a considerable amount of money when starting a business. You'll also be helping the environment by giving pre-used items a second life.
Did you know that limited company directors can claim various business expenses? Whether you work from home or haven’t started trading yet, you can offset certain costs in your annual company tax return.
Here are some of the expenses you can claim:
If your company isn't trading yet, you can claim these startup costs:
Starting a business can be expensive, but there are plenty of ways to reduce costs and make your resources go further. By implementing the tips and strategies outlined above, you can become a financially savvy and resourceful entrepreneur.
Ready to get started? The best place to start is 1st Formations. They offer a range of affordable company formation packages, plus excellent value for money with extras like business banking and company secretarial services.
As a customer, you’ll also enjoy exclusive partner discounts and offers, helping you save on a variety of business tools. Visit their website or call their team on 020 3897 2233.
