Startup costs can make or break a business in its first year. You absolutely need to invest in your business in order to get it set up, to let people know it is there and to build a reputation for quality. Make sure you set aside sufficient funds to get yourself set up correctly so your business stands the best chance of success.

If you are at home with the children and pondering whether or not to go back to work after your maternity leave ends, then starting a small business can seem like a great alternative.

Maybe one of your friends has persuaded you to join them in a network marketing business, maybe you fancy crafting and starting an Etsy shop, maybe you want to retrain and become a reflexologist, a life coach, a personal trainer, or something else that you can do at home and be with the children.

It can sound like the perfect solution, doing something that you love and getting paid, without having to commute to an office, work long fixed hours or be accountable to someone else.

This can certainly be the case for many people, however before you commit to the self-employed lifestyle, make sure that you have considered all of the extra costs that you will have to take on. When you have a job, the money flows just one way – from the employer into your bank account, but when you have a business, there are lots of things that you will need to pay out for – sometimes before you make any money back.

Insurance

One of the biggest areas of your life that changes dramatically when you become self-employed is the area of insurance. Suddenly you will need insurance for so many more things, and some of the existing insurance policies that you have might become more expensive.

To start with, your home insurance might increase if you use part of the home as a business premises or office, and your vehicle insurance may increase if you start to use your vehicle to travel for your business. If you need specific tools or equipment for your new business, these might not be covered in your home policy, so you may need to insure them separately.

What other insurance you might need is going to be different for every business. It depends on what product or service you’re offering, what kind of business you are, and the team that you intend to have working under you. If you’re working with customers or on the property of your customers, then you’ll want public liability insurance; just in case something bad happens during your time there. This is also the case if you are doing things on other people’s websites – if your actions cause a website crash, you could find yourself liable for any business lost.

You’ll also want insurance based on what you’re doing, that protects you and your customers or clients if something goes wrong. If you’re a tradesman, then you’ll want insurance for tradesmen in your profession. It shouldn’t be hard to find insurance for your startup based on your profession, but you’ll want to make sure you’ve figured out the price you’ll have to pay before you think about starting up your business.

You may also want to think about life insurance, critical illness insurance and health insurance. These are typically covered in your contract with many employers, but once you are self-employed you need to look after all of these things yourself

National Insurance and Taxes

If you make more than £1,000 in sales in any tax year in the UK, then you need to register as a sole trader with the tax office. That includes all products you sell, and money that other people pay you for services. If you want to keep up your entitlement to a state pension, then you will need to make your own National Insurance contributions. You will also need to keep certain records of your business, and submit a tax return each year. If you don’t know how to do that, then you will have to invest in either training or support from a bookkeeper.

You may also want to contribute to a private pension scheme, and you may need the services of a financial adviser to find the right product for you.

Website startup costs

When you first set up in business you are going to need some way of letting people know that your business exists. The vast majority of businesses will benefit from having a website to promote them. If you are in network marketing then you may find that your company provides you with a website selling platform, but it may be beneficial to have a site of your own as well, where you can blog, and bring your own personality to your business.

Again, it is possible to set up and design a website yourself, and it doesn’t have to cost a huge amount, but if you don’t have the skills to do this, then you will have to pay a website designer. You will also incur ongoing costs for website hosting and maintenance.

Marketing

You will also definitely need to do some kind of marketing when you start up in business. This will either take you lots of time or money or possibly a bit of both.

You will need to decide whether you are going to use digital marketing, or traditional methods (flyers, adverts in local newspapers, PR in magazines), or a combination of the two. If you are doing digital marketing you need to choose your target market and focus on the social media platforms where those people hang out. It may be a good idea to spend some money on advertising on the platform of your choice. Again, if this is not your specialist area then hiring a digital marketing specialist to get you set up, may be a good investment.

The costs of running a small business can certainly mount up, especially in the first year when your returns are likely to be smaller. Many startup businesses get into difficulties because they have not budgeted enough money to set up and market their business well, thereby preventing themselves from growing. Make sure that you are aware of all the potential costs that could arise in your first year and that your business budget will comfortably cover those, before you take the leap.

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