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 (£)
Property25%£3,000
Transport20%£2,400
IT20%£2,400
Other35%£4,200

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…

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