Before your open for business

Start-up costs cover all the one-off costs needed to start your business. These outgoings can be grouped into two types of start-up spending:

  • Market Research Costs
    If you incur costs in researching the potential market and need for your business for e.g the analysis of existing comparable products on the market, transportation, labour supply etc and have costs such as consultancy fees and expenses whilst doing deals with potential suppliers and distributors, then these should be incuded as part of you set-up costs.
  • Pre-launch costs
    Start-ups need to consider costs incurred once the decision has been officially made to launch and trade but before it is actually open for business. Such examples of typical pre-launch start-up costs include digital and traditional advertising in readiness for launch, office or studio furnishings and equipment, rent deposits and installation charges for digital infrastructure e.g. Wi-Fi, purchasing of equipment or vehicles etc paid for in full so not an ongoing cost to the business but one off purchases then these form part of your start-up costs.


Types of business costs

Once your business is up and running there will be two types of costs we need information on, these are fixed and variable business costs.

Fixed costs relate to outgoings that must be paid regardless of whether the business turns over a profit. Businesses in all types of industry are going to experience different types of fixed business costs.
Below, we list the most common fixed business costs which require payment no matter what happens to the business day-to-day.

Examples of fixed business costs

  • Professional fees
  • Insurance
  • Premises costs
  • Staffing and employment
  • Equipment and supplies
  • Stock
  • Sales and marketing
  • Finance
  • Technology costs

Fixed Costs explained

Professional fees

These may include the cost of hiring an accountant, solicitor, lawyer, or other expert professional to deal with the legal aspects of starting a business such as company formation, copyright protection, drafting partnership agreements or other fees you may need to pay to the Government for certificates and inspections for health and safety or food hygiene, for instance.

Insurance costs for new businesses

Some of the typical types of insurances for business start-ups include:

  • Employers’ liability insurance
    The only type of business insurance that’s a legal requirement if you employ anyone. Businesses can be fined up to £2,500 for every single day they don’t have this protection in place. It’s designed to protect any compensation claims made by employees for injuries or physical damage caused at work. 
  • Professional indemnity insurance
    This covers your business in the event of any compensation claims made by a client or member of the public in the event they believe you’ve made a mistake at work i.e. breaching confidentiality agreements or copyright infringement. 
  • Public and product liability insurance
    If your business works closely with or in the public eye or your customers come to your premises this protection covers your business in the event of compensation claims made by someone who believes injury or damage was caused by your business. Similarly, product liability cover guards your business in the event a product you sell causes injury or damage to a member of the public. 
  • Building and contents insurance
    Whether you rent an office or studio, or a workshop or a shop front, it’s your responsibility to cover the value of the contents within your workplace. Additionally, if you own your premises you’ll have to insure the building itself too as part of the terms of your mortgage.

Premises costs

Renting or leasing commercial property will include monthly costs that you should factor into your regular outgoings. Service charges and connection of utilities, followed by utility bills (electricity, gas, water, telephone) will also ned to be considered.

Staffing and employment

There are a wealth of staffing options available to business start-ups, from full-time employees to freelance contractors. You will need to decide which options are the best financial fit for your business; is your income already at a level that the business can handle a full-time wage? Would you prefer the flexibility of hiring freelancers as and when you need them? These are some of the questions you will need to ask yourself when the time comes to think about staffing.

Equipment and supplies

There are many essential first-day purchases for a start-up’s office for e.g

  • Telephony
  • Computers/laptops
  • Furniture
  • Stationery
  • Signage


If you’re a retailer then you will need to factor in what stock you need to meet the orders you have.

Sales and marketing

Marketing and promoting a new business is almost a non-stop task. Digital marketing increasingly forms the basis of many start-up’s efforts to attract and retain customers, through paid advertising that allows you to be visible for related keyword terms within major search engines for a set budget and organic marketing which is a mixture of online PR and content creation about your products and services.

Those with a database of potential customers or existing leads can also invest in email marketing to distribute highly-targeted emails to grow exposure, but this also comes at a cost for distributing emails at high volume.

It’s almost unheard of for businesses today not to have a website; so whether you design your own website or pay a freelancer or an agency to design one for you, you’ll need to factor in time and money to develop an online presence.

Finance for start-ups

Another fixed cost that’s often unavoidable for ambitious businesses is the repayment of business loans or finance. For entrepreneurs without a bottomless pit of money to invest, equity and debt finance options are becoming increasingly popular with New and Growing Companies.

Technology Costs

In addition, there are a growing list of other tech expenses you should be aware of when setting up your business:

  • Software licenses
  • IT support
  • Website hosting
  • Data storage
  • Email accounts
  • Mobile phone contracts
  • Payment gateways
  • Any third-party integrations or services

Variable Business Costs

The difference between fixed and variable business costs is that the latter change in line with sales or production volume. As production increases, variable business costs rise with it. Variable costs include direct material costs and direct labour costs that are essential to carry out the work required.

Businesses in their infancy should work hard to keep fixed and variable start-up costs to a minimum, simply because you’ll need to earn less to break even. It’s good discipline regardless to avoid overspending and purchasing things your business doesn’t urgently need. With a low-cost base, your chances of long-term success as a New and Growing Company are that much greater.

Examples of variable business costs

The difference between fixed and variable business costs is that the latter change in line with sales or production volume. As production increases, variable business costs rise with it. Variable costs include direct material costs and direct labour costs that are essential to carry out the work required.

  • Individual product cost
  • Delivery
  • Staff wages

Individual product costs

For businesses that must deal with suppliers for their goods, individual product costs can vary on a sliding scale format, largely depending on quantity. Generally, the more you buy of a product from a supplier or wholesaler, the less you’ll pay per item.

Those businesses most reliant on raw materials to help create their finished product will have more variable costs than other firms.


In terms of packaging and shipping, delivery is another key variable business cost. As a business moves more of a specific product, the costs for its packaging and transport will increase with it. Conversely, during times when fewer products are sold, delivery and packaging costs will consequently diminish.

Staff wages

Wages can be placed in both variable and fixed business costs sections. For instance, if a business hires employees that are only paid if they work billable hours, this is regarded as a variable cost. However, if they are paid fixed monthly salaries no matter how many hours they work, this is a fixed business cost.