1. Why Knowing Startup Costs is Important
Understanding how much it costs to set up a business helps you:
- Plan finances realistically.
- Secure loans or investment.
- Avoid unexpected expenses.
- Reach profitability faster.
2. Average Cost to Set Up a Business in 2025
Startup costs vary depending on the type and size of the business:
- Home-based online business: £1,000 – £5,000
- Small service business (e.g., cleaning, consulting): £5,000 – £15,000
- Retail shop or café: £20,000 – £100,000+
- Tech startup or manufacturing business: £50,000 – £250,000+
3. Typical Expenses When Setting Up a Business
1. Legal & Administrative Costs
- Business registration: £12–£100 (UK example, varies globally).
- Licenses and permits: £50 – £1,000 depending on sector.
- Legal and accounting fees: £500 – £5,000.
2. Premises and Utilities
- Home-based: Minimal costs.
- Office/retail rent: £500 – £3,000 per month depending on location.
- Deposits and fit-out: £5,000 – £30,000.
3. Equipment and Technology
- Computers, phones, and software: £500 – £10,000.
- Machinery (if manufacturing): £10,000 – £100,000+.
- POS systems for retail: £500 – £2,000.
4. Inventory (for product-based businesses)
- Initial stock: £2,000 – £20,000+.
5. Marketing and Branding
- Website: £500 – £5,000.
- Logo and design: £200 – £2,000.
- Initial advertising: £1,000 – £10,000.
6. Staff Costs
- Salaries: £20,000 – £35,000+ per employee per year.
- Recruitment costs: £500 – £5,000.
- Training and onboarding: £200 – £2,000.
7. Insurance and Compliance
- Employer’s liability insurance: £50 – £500 annually.
- Professional indemnity/public liability insurance: £200 – £2,000 annually.
8. Working Capital (Emergency Funds)
- At least 3–6 months of operating expenses recommended.
4. Cost Breakdown by Business Type
- Online Shop (dropshipping): £1,500 – £5,000 (website, marketing, minimal inventory).
- Coffee Shop: £50,000 – £120,000 (premises, equipment, licenses, staff).
- Consulting Firm: £2,000 – £10,000 (website, marketing, office setup).
- Construction/Trade Business: £10,000 – £50,000 (vehicles, equipment, licenses).
- Tech Startup (SaaS/app): £25,000 – £250,000+ (development, servers, marketing).
5. Tips to Reduce Startup Costs
- Start small (MVP – minimum viable product).
- Use free or low-cost software tools.
- Work from home instead of renting offices.
- Outsource non-core tasks (accounting, design).
- Apply for government grants and startup loans.
6. Funding Options to Cover Startup Costs
- Government Start-Up Loans (UK: up to £25,000 per person).
- Small Business Grants for innovation, sustainability, or regional growth.
- Bank Loans and overdrafts.
- Angel Investors and Venture Capital for high-growth startups.
- Crowdfunding for community-driven projects.
Frequently Asked Questions
Q1: What is the minimum cost to set up a business?
You can start an online business for under £1,000, while physical businesses need much higher capital.
Q2: Do I need a lot of money to start?
Not always—service-based businesses (consulting, freelancing) can be started with minimal costs.
Q3: Can I get funding for setup costs?
Yes, through government loans, grants, and investors.
Q4: What’s the most expensive part of setting up a business?
For most, it’s premises and staff costs. For tech businesses, it’s product development.
Q5: Are setup costs tax-deductible?
Many startup costs (equipment, marketing, professional fees) can be claimed as business expenses.
Q6: How do I calculate my own startup costs?
Make a list of all expected expenses, categorise into one-time vs. ongoing, and add 10–20% extra for emergencies.
Conclusion
So, how much does it cost to set up a business in 2025? The answer depends on your industry, location, and business model. Online businesses can start for under £5,000, while retail shops, restaurants, or tech startups may require £50,000–£250,000+. Careful planning, budgeting, and exploring funding options are key to making your business launch successful.