How Much Does It Cost to Run a Start-up in the UK?

man planning a start up

The UK is one big jungle of start-ups. Between 2018 and 2019 alone, the country already had over 600,000 of these companies, according to Micro Biz Mag. That’s equivalent to a whopping 1,840+ newly founded entities in a day.

Of these, nearly half wouldn’t make it past the fifth year. The good news is at least 85% would celebrate their first anniversary.

For those planning to build their own, how can they increase their chances of making it past the first year and eventually reach their fifth? One area they can focus on is the cost.

How Much Does a Start-up Cost?

The cost can significantly vary depending on the type of business one is wants to put up. The simpler it is, the cheaper it gets. For instance, the Cambridge Satchel Company was launched for a budget of no more than a thousand pounds.

As expected, tech start-ups are some of the most expensive businesses to open. According to the Telegraph UK, the average spending of such a business in the first year could reach over £20,000. It seemed to match the results of Company Warehouse wherein the majority said they started with a budget of £10,000.

The cost also depends on where one opens the business. London start-ups are more likely to spend more money than those in other regions of the UK. Their expenses could be as much as £30,000.

Where does the budget go? It boils down to the priority or nature of the business. For a tech start-up, the company may spend on:

1. Salaries

According to PayScale, a company usually spends at least £20,000 annually on an entry-level web developer. An administrative assistant is worth £18,000. Start-ups could bring these costs down by hiring themselves or outsourcing some of the jobs.

2. Space

Tech start-ups are more likely to rent some space because of the pieces of equipment they needed for the business. The cost isn’t cheap, though.

Statista shared that a prime office in Reading is about £468 per square meter per year. In London, the rent may reach £82.50 for a grade-A building in 2021, said Oktra.

Fortunately, start-ups can explore many options to save money on rentals. Those living in the city can consider staying in a cheap hostel. Some now offer long-term accommodation options with co-living arrangements. They can save money on a commute or even begin their business in a hostel since the space now provides a common room.

office space

3. Registration Costs

Start-ups may be better off as a limited liability company or a corporation rather than a solo trading entity to protect their personal assets in case the companies don’t survive and leave behind debt. Creditors can run after the business assets only.

A corporation or limited liability business, though, has to register to the Companies House, which will also make you subject to corporate tax. If the business is a corporation, the incorporation fee is around £40, but if it chooses to process its paperwork online, they can save over £25.

4. Technology Expenses

Companies can divide these into different categories: equipment and software. A 2019 iMac is available in the market for at least £1,200. An entry-level server, on the other hand, is about £750.

When it comes to software, prices can soar if they are custom. A medium-sized app that will take at least three months to make can already set a company back by over £30,000. Start-ups can reduce this cost by relying on available commercial options in the beginning or build their own software.

Start-ups fail for many reasons, but one of the common ones is the lack of a proper budget. When one knows how much they will likely spend and where the money will go, they can develop better foresight.