The Average Cost of Running a Small Business

by | Sep 4, 2018

What is the average cost of running a small business?

Research from Lloyds Bank has shown that the average cost of starting a small business (excluding home-based businesses) is £12,000.

Expense% total costAverage cost (£)

The average cost of running a small business: expenses to consider

Whether you plan on starting a new business or want to benchmark the running costs of an existing organisation, having an idea of the average cost of running a small business is a fundamental stepping stone to SME success.

Of course, there is a lot of speculation involved as to how much it costs to start and run a business, and there are a number of varying factors according to business type and size. Putting a general ballpark figure to these costs can be problematic, which is why it’s important to do your research and due diligence to create a budget and cost analysis to manage your business finances.

In this article, we’ll highlight a few key areas of expenditure and the average cost of running a small business to help with your planning.

Your business plan and budget should take all feasible expenses into account. Again, your business will have its own specific list of expenses, but here are some common business expenses to get you started:

  • Physical premises: offices, shop premises
  • Utilities: gas, electricity, water, waste.
  • Technology-related expenses: infrastructure, equipment, website hosting, email hosting, and more
  • Vehicle cost: purchase, repayments, taxes, insurance
  • Industry/sector specific legal documentation: licenses, permits etc.
  • Equipment: purchase, lease, upgrades
  • Stock: purchase, delivery, storage
  • Business insurance and taxes
  • Employees: wages, benefits
  • Professional services: lawyers, accountants, brokers etc.
  • Office supplies: furniture, stationery
  • Marketing: branding, website development, advertising
  • Remember to also account for unexpected costs and financial emergencies

‘Hidden’ costs when working out the average cost of running a small business

When working out your budget, don’t forget to include the following less obvious expenses:

  • Underused or unused equipment – for example, how much insurance are you still paying on the old laptop lying in the storeroom?
  • Upgrades, repairs, services and maintenance
  • Shrinkage – goods lost through error, theft, fraud and damage
  • Payment delays and debts
  • Bank and vendor fees
  • Your time – what are your daily operations costing you, and are you focusing your efforts efficiently?

Average start-up costs for small businesses

Research from Lloyds Bank has shown that the average cost of starting a small business (excluding home-based businesses) is £12,000.

The average costs of starting a business are as follows:

  • Property accounts for 25% of start-up costs (the largest share), averaging about £2,987
  • Transport accounts for 20% –  £2,440
  • IT accounts for 20% –  £2,426

Other stats from the research revealed that:

  • 32% of new business owners say that they found the costs of starting  to be higher than expected
  • Female business owners spend an average of 59% less than their male counterparts on starting a business

The key to answering the question of the average cost of running a small business lies in comprehensive cost reporting over time. You can use these figures to gain an accurate understanding of your typical business expenses to help you forecast accurately into the future.

Reduce the average cost of running a small business with better energy management

Taking simple steps to save on your energy bill can help bring down the average cost of running a small business. Switching energy suppliers and moving on to a cheaper tariff can mean significant savings.

Your small business may also be eligible to save on VAT on energy.

Contact the energy experts from Smarter Business for with a no-obligation quote on your business energy – without charging a fee! Let’s see how much you can save…

2024 Energy Market Volatility Strategy | Smarter Business

2024’s Forecasted Energy Price Increases and the Best Way To Save  Energy Market Volatility: Take The Power Back   Wholesale energy market volatility has seen an increase in prices, with projections showing fluctuations for the remainder of the year. With anticipated...

MOP DC/DA For Business Electricity | Smarter Business

Energy Spotlight: MOP DC/DA Contracts  What Are MOPs and DC/DA and Why Are They Important?  Effective metering and timely energy data hold extensive potential benefits for businesses. These include billing accuracy, effective energy efficiency strategies, and costs...

2024 Commercial Energy Price Forecast | Smarter Business UK

2024 Commercial Energy Price Predictions  For business owners, the question on everyone’s minds is, “Will energy prices fall in 2024?” At first glance, we appear to have started strong in 2024 – with a 12% reduction in the short-term energy price forecast according to...

2024 Business Energy, Gas, Water, Facilities Maintenance

Business Energy Tips for a Strong Start In 2024    Insights To Ensure Business Utilities Are New Year Ready  As we take our first steps into the new year, it is the perfect time to get everything in line to start 2024 on the right foot. Take the time to relook at...

2023 Winter Business Energy Savings

Quick Tips for Winter Energy Worries  How To Prevent Winter Energy Woes    As winter approaches, the cost of winter energy – at home and at work – is on everyone’s minds. It’s a good time to scrutinise energy consumption with savings in mind.  The domestic energy...