Top 5 most common hidden costs business owners face when setting up a business

A new survey from small business credit card company Capital on Tap reveals how much it costs small business owners in the UK to set up their businesses, the most unexpected costs they face and how they tend to raise capital.

Capital on Tap reveals it costs on average £21,193 to start your own business in the UK.  From stock, to equipment and software, the industry you decide to set up a business in has its own requirements that need to be taken into consideration.

Real Estate companies cost the most to set up, at over £60,000.  At the other end of the scale, Entertainment and Events companies, including event planning and party supplies are the cheapest to set up, costing just over £5,000.

It costs an average of £34,250 to set up a business in Norwich – the most expensive of all UK cities

Norwich is the city with the most expensive costs to set up a business, at over £34,000. In comparison, entrepreneurs in Nottingham spent an average of £7,626 to start their company, the lowest of all locations. Interestingly, London ranks eighth, costing an average of £20,797 to set up a business.

Payroll costs are the most surprising hidden fees for UK small business owners, setting them back over £3,500

Of all business owners surveyed, employee payroll is the most surprising hidden cost when setting up a business (£3,679). The next unexpected cost, setting business owners back by £2,762, is fees associated with inventory or stock. Repayment of loans or financial arrangements is the third most costly unforeseen expense (£2,606).

One-third of small business owners have asked friends and family for money to raise capital for their business

The survey shares the most common way for small business owners to raise capital is through personal investment, with 61% raising capital in this way. Getting a bank loan or line of credit is the second most common way, with a quarter (25%) of respondents saying they raised funds this way.

An additional 22% of business owners seek help from family. This is common in the personal care industry, with 44% of business owners saying they have asked friends and family for money to ensure the success of their business.

45% of Gen Z business owners said they would ask friends or family for money if it meant saving their business, compared to just 26% of over 55s.

16% of business owners said they would remortgage their house if it helped their business survive, and 9% have already done this

Business owners will go to great lengths to ensure the success of their company, with 16% reporting they would be willing to remortgage their house if it meant their business survived. In fact, the survey shows 9% of small business owners have already done so.

Although a slightly less traditional method, nearly a quarter of respondents (23%) said they would be willing to use a crowdsourcing platform or community fundraising initiative. Industry-wise, half (50%) of those who work in agriculture said they have used this method.

Additionally, over half (54%) of all business owners surveyed said they would restructure or downsize the business to keep it afloat.

Hugh Acland, Commercial Director from Capital on Tap says, “Every small business owner wants to grow their company, but with so many methods of doing this, it can be hard to know where to begin.

“It’s crucial to start with a detailed business plan. Determine your business’s financial needs and decide which method of raising capital you are going to take. If you need support with cash flow as you wait for profits to come in, applying for a business credit card may help.

“As you move forward, stay adaptable, be prepared for setbacks, and keep your focus on creating value for your customers. With dedication and the right resources, your business can continue to grow in a competitive landscape.”

You can read the full research here: https://www.capitalontap.com/en/blog/posts/raising-capital/