The average cost of starting up a new business is £12,601, according to new research from Lloyds Bank, with property the single largest contributor, accounting for 25% of costs incurred.
Next, transport and IT each account for 20% of start-up costs. The cost of business space (£2,987), vehicles (£2,440) and technology (£2,426) altogether contribute to over 60% (£7,853) of a new business’ start-up costs.
The research highlights a revealing disparity between the genders around how much is spent and where the money goes. Female business owners spend 59% less than their male counterparts at the launch of their businesses with men spending an average of £13,551 compared to £8,031 for women. Men budget significantly more on IT equipment (£3,149 vs £470) and websites/marketing (£2,570 vs £1,281). In contrast, females prioritise property (£3,777 vs £2,694) and loan repayments (£1,703 vs £393).
32% of new business owners found the financial costs associated with starting up were higher than expected, while only 6% found it to be less than they’d budgeted for. Younger start-up owners (18-34 year olds) were most likely (42%) to find the costs higher then they’d expected compared to only 30% of older entrepreneurs (35+)
76% of new entrepreneurs sought business advice prior to launch but they typically turn to more informal sources of information such as friends and relatives (41%) or former colleagues (30%) rather than an accountant (19%) or their bank (11%).
Jo Harris, managing director, Lloyds Bank Retail Business Banking, said: “When you’re starting up a new business, don’t rush into rash expenditure that you may later regret. Planning and research is essential, so spend wisely and keep costs low. The more you spend upfront, the more money you’ll have to generate in the crucial first months of being in business.
“Think about what is really important. Many of the most successful businesses started at the kitchen table or in the shed at the bottom of the garden so consider whether you really need new premises at the start.
“Advice from friends and family is important but your bank can support you with specialist guidance and tools to help you write a detailed business plan and prepare a budget to get you off on the right footing.”