Before you launch a new business, you’ll need to make sure you have enough cash to get it off the ground – for your own reassurance, as well as practical reasons. But how much does it actually cost to start a new business?
Over 800,000 new businesses were registered in the UK during the 2024/25 financial year. But as barely half of SMEs survive beyond three years, the key is budgeting enough to not only launch, but survive and thrive in the long-term.
In this article, we’ll explain how to calculate your start up costs, why it matters, and how to keep expenses under control.
Why calculate your business costs?
Imagine doing your weekly grocery shop but not knowing what you can afford to spend. Would you leave important items on the shelves? Would you buy cheaper items to be safe? Would you feel anxious when you got to the till?
Now imagine starting a business without knowing how much money you actually need to successfully launch. The parallels are clear – you’d risk overspending, you’d second-guess every decision, and your stress levels would skyrocket.
To give your business (and your mental health) the best chance of success, it’s important to plan your business costs carefully.
Knowing how much money you’ll need will also help you:
See if you have enough to cover all your upfront costs
Identify whether you need to raise extra money
Check if your business idea can really work in the long run
Plan a detailed budget that allocates your money effectively
Give potential investors confidence that you’ll spend their money wisely
Figure out if you have spare cash to invest in growth or extra help
Feel confident about your business’s future
What are the different start up costs for a business?
Fixed business costs
Fixed costs don’t change in the short term – though they may increase from year to year. They can include:
Equipment: Tools, machinery, laptops, etc, needed to keep your business running
Registration fees: Costs to legally register your business name, trademark, or company structure
Business premises: Rent or mortgage payments for your office, shop, or warehouse
Website: Domain name, hosting, and initial design or development costs to start an online business
Business insurance: Policies like public liability or professional indemnity to protect your business from risks
Software and licences: Subscriptions or one-off payments for essential tools such as accounting software or design apps
Emergency fund: A financial safety net for unexpected expenses or slow trading periods
Variable business costs
Variable costs can change from month to month, depending on the needs of your business, customer demand, and other factors. They can include:
Research: Market research, focus groups, or tools to identify solid business ideas and understand your customers and competition
Inventory: Stock or raw materials you need to buy, which can vary based on customer demand and market trends
Marketing: Ads, social media campaigns, or promotions to support your digital marketing strategy
Branding: Designing a logo, business cards, or packaging to create a strong identity for your business
Office supplies: Day-to-day essentials like stationery, printer ink, or cleaning products
Professional services: Fees for accountants, lawyers, or consultants who support your business
Payroll: Wages or salaries for yourself and any staff, including taxes and pension contributions
Employees: Costs for hiring, training, or outsourcing work to freelancers or contractors
Unexpected costs
Costs that catch you off guard can be tricky to predict, but they’re important to plan for. They can include:
Repairs or replacements: Sudden breakdowns of equipment or vehicles that need urgently fixing
Regulatory changes: New laws or compliance requirements may force you to update processes or training
Late payments or bad debts: Customers or clients that don’t pay on time could leave you short on cash flow
Supply chain disruptions: Unexpected price increases or delays from suppliers may force you to find alternatives quickly
Legal fees: Unplanned disputes, contracts gone wrong, or fines could require professional help to resolve
Seasonal slumps: Quieter trading periods may reduce your income while your fixed costs stay the same
How much does it cost to start a business?
The cost of starting a business can vary wildly, as some businesses are much more capital intensive than others. Some businesses can be started with very little money, while others require hundreds of thousands of pounds to get set up.
For example, a self-employed photographer might not need to spend much at all if they already have the equipment they need, while someone opening a restaurant would likely need at least £100,000.
Here’s a rough estimation of what starting the following types of business could cost you:
Business | Fixed costs | Variable costs | Estimated start up cost |
|---|
| Camera equipment (if not owned), portfolio website, insurance, software subscriptions | Marketing, travel, client appraisals, professional services | |
| Tools, transport, insurance, portfolio website, licenses | Marketing, materials for initial projects, professional services | £2,000-10,000 (more if buying a vehicle) |
| Kitchen equipment, health and safety compliance, licenses, insurance, vehicle | Initial food inventory, branding, marketing, staff, training | |
| Machinery, premises, quality control setup, insurance | Raw materials for first batch, prototyping, branding, marketing, staffing | |
| Premises lease, equipment, plumbing and electrical upgrades, branding | Initial stock, staff uniforms, marketing, POS systems | |
| Computers, software licenses, IP protection, legal setup, office space | Hiring, product development, marketing, beta testing, hosting | |
| Premises, heavy kitchen equipment, ventilation, licenses, insurance | Initial food stock, staff, branding, marketing | |
How to calculate your start up business costs
Understanding how much money you’ll need to start your business is the foundation of a smooth, stress-free launch. You can use the following steps to calculate your business start up costs:
1. Calculate your fixed business costs
Fixed costs are expenses that stay the same each month, regardless of how much you sell. This could include things like rent, subscriptions, and fixed-term energy bills. Since these costs are recurring, shopping around for the best deals could save you a lot of money in the long run.
2. Calculate your variable business costs
Variable costs change depending on your business activity, customer demand, and sales. Examples include raw materials, shipping costs, and fuel. So you’ll need to estimate these the best you can – speaking to people in your industry and reading the experiences of others can help you narrow down realistic numbers.
3. Budget for unexpected costs
Unexpected expenses can catch you off guard, so it can be helpful to set aside a buffer to support you for several months. Common surprises can include things like equipment maintenance, mid-contract price increases, and hiring costs.
4. Create a financial forecast
A financial forecast enables you to plan for the future by estimating your income and expenses over the first year, or until you’re profitable. It can help you:
Predict your monthly revenue based on sales, pricing, and customer volume
Calculate your break-even point (the moment your revenue covers your costs)
Add up any losses until you break even to figure out your total funding needs
Understand how much money you might need to raise or save before launching
To create a forecast, add up your fixed costs, variable costs, and potential unexpected costs to get your total start-up costs for your first year. You can use this formula:
Total start up costs for Year 1 = one-time costs + (recurring costs * 12 months) + (unexpected costs * 3 months)
For example:
One-time costs: £30,000
Recurring monthly costs: £5,000
Unexpected monthly costs: £3,000
Total budget for Year 1: £30,000 + (£5,000 * 12) + (£3,000 * 3) = £99,000
You could alter the calculation so that it supports you until you expect to be profitable. For example, if you expect to break even after three years, you’d multiply your monthly costs by 36.
How can you reduce the cost of starting a business?
Starting a business doesn’t have to break the bank. With a bit of planning and some smart choices, you could grow your business without spending a fortune.
1. Save on registration fees
Registering your business can be surprisingly affordable. Instead of paying the standard £100 through Companies House, you can register your business for just £24.99 with Tide.
2. Plan ahead with a cash flow forecast
Unexpected costs can derail even the best-laid plans. A cash flow forecast helps you anticipate and plan for expenses or potential shortfalls. By mapping out your income and outgoings, you can make smarter decisions and keep your finances on track.
3. Claim back eligible expenses
Did you know that many business expenses can be claimed back? From equipment and travel to office supplies, claiming these expenses can reduce your taxable income – which means more money stays in your business.
4. Consider a Start Up Loan
If you need a financial boost of up to £25,000, a Start Up Loan could help. The government-backed loan is designed to help new businesses get off the ground, offering competitive rates (6% as of 2026) and flexible repayment terms. Just remember to factor in interest and fees when planning your budget.
5. Check your credit score
A stronger credit score could open doors to better finance deals. You can use Tide’s Credit Score Insights to see where you stand and find ways to improve your score.
6. Consider asset finance for big purchases
Instead of buying expensive equipment, vehicles, or property outright, asset finance lets you spread the cost over time. Whether it’s vehicle finance for a company car, machinery finance for essential equipment, or property finance for your premises, these finance products could help ease the pressure on your cash flow. Just be mindful of interest and fees.
7. Use a revolving credit facility
For businesses with fluctuating cash flow, a revolving credit facility can provide flexible access to finance when you need it. You only pay interest on what you borrow, which can make it a cost-effective way to manage short-term expenses.
Business costs checklist
Starting a business is an exciting journey, and being prepared will help you make the most of every step. Use the following checklist to turn your vision into reality while keeping your finances on track:
✔️ Identify your fixed business costs, which stay the same each month. These can include equipment, registration fees, premises, website, insurance, and software.
✔️ Calculate your variable business costs, which change with sales and demand. They can include inventory, marketing, branding, office supplies, professional services, and payroll.
✔️ Plan for potential unexpected costs like repairs, legal fees, late payments, or supply chain issues.
✔️ Set aside a contingency fund to cover 3-6 months of expenses and surprises.
✔️ Create a financial forecast to estimate your first-year costs, or your expected time to break even.
✔️ Reduce costs by registering your business with Tide, using a cash flow forecast to avoid surprises, claiming expenses to lower taxable income, and exploring funding options like Start Up Loans or asset finance.
✔️ Review your budget regularly to stay on track and amend your forecast as circumstances change.
Wrapping up
Starting a business is an exciting adventure, but success often depends on careful financial planning. By calculating your start up costs, you can avoid surprises, make informed decisions, and set your business up for long-term growth.
Here’s a reminder of the key points:
Break down your expenses into fixed, variable, and unexpected costs to get a clear picture of what you’ll need to launch and sustain your business
Set aside a contingency fund to cover surprises like repairs, legal fees, or supply chain disruptions
Use a financial forecast to estimate your income and expenses, helping you predict cash flow and identify funding needs
Reduce costs where possible by saving on registration fees, claiming back eligible expenses, and exploring financing options to ease cash flow pressure
Regularly review and adjust your budget as your business evolves, so that you’re always prepared for what’s ahead
When you’re ready to take the next step, register your business for just £24.99 with Tide, instead of paying £100 via Companies House. Receive your certificate of incorporation within one business day*, plus get a free business current account.
*If you incorporate your company on a Friday, you may not receive your certificate until the following Monday.
