Starting a new business can be exciting and nerve wracking. If you are in the process of mapping out your first business, you might feel like you’re going into the unknown.
While you may very well need to learn on the job when it comes to aspects like employee management and meeting deadlines, one thing that you can get up to speed on prior to launch is hidden costs.
We know you’re aware of staff, rent, and equipment costs, but today we’re going to delve into some of the more unheard of expenses that new businesses should be aware of.
Deemed Water Contracts
A deemed water contract is when a business begins using water despite not signing a contract. The water company then automatically begins charging them.
If your business moves into a new premise and uses the building’s water without setting up a formal contract with a water supplier, you will automatically enter into a deemed contract. This is a default agreement that makes sure a business continues receiving water.
It’s put in place to ensure a continued supply of water and allow water companies to charge for usage despite no contract being signed.
The issue for you is that deemed water contracts can have higher tariffs and stricter payment terms. Tight deadlines could suddenly be sprung onto you.
Do the following prior to moving into new premises to avoid overpaying:
- Notify the water supplier and establish a favourable contract.
- Check whether or not you are on a deemed water contract and ask to see the terms and conditions of the agreement.
- Analyse the water account history of the premises to check you aren’t inheriting debts from previous tenants.
Learn more about deemed water contracts.
Maintenance and Repair Costs in Shared Facilities
If you are considering moving into shared premises, you may be vulnerable to fluctuating expenses and unexpected one-off charges. Shared responsibility of bills can give you less control over expenses.
These costs can come in the form of:
- Common area maintenance costs
- Unexpected plumbing repairs
- Heating, ventilation, and air conditioning expenses
- Administrative fees
Shared maintenance and repair costs can be a hidden, detrimental cost to a new business finding their feet. If you are looking to move into shared accommodation, here is how you can mitigate these costs:
- Before moving in, negotiate a maximum annual increase for common maintenance areas to avoid unexpected spikes in bills.
- Ask the landlord to show you the past few years of maintenance costs to get a gauge for what shared costs could look like.
- Set aside an emergency fund to cover unexpected costs.
Insurance
Insurance provides your business a safety net from a variety of risks, but it’s important to understand different insurance categories and their annual prices:
Public Liability Insurance: Protection if your business causes injury to a third party.
£95 to £125 for basic cover.
Employers’ Liability Insurance: This covers claims from employees who get injured or sick at work.
£60 to £200 per employee.
Professional Indemnity Insurance: Protects against negligence claims.
£80 to £120 for basic policies.
Business Contents Insurance: Covers loss or damage to property.
£120 to £360.
It is imperative that you secure insurance on the above areas; going without it could liquidate your business before it even gets off the ground.
How Fees Vary By Location
Business costs can vary heavily depending on your location.
London is the most expensive city in the UK by some way. Certain costs can differ significantly depending on where your business is located.
Here are some approximate comparisons between the English capital and average UK rural areas:
Office Space:
- London: £70 to £150 per square foot per year.
- Average rural area: £10 to £25 per square foot per year.
Planning Permission (Minor Scale Applications):
- London: £465.
- Average rural area: Can start as low as £65.
Building Control Fees (Small Project):
- London: Upwards of £1,500.
- Average rural area: £300 to £900.
Big cities like London have their advantages, but it’s important to be aware of the difference in costs between opening a business in a major city and a smaller area.
Software Subscriptions
Software tools help you complete tasks, stay organised, and convey professionalism to prospective clients and partners.
However, they come at a cost and it’s a good idea to consider these when budgeting overall expenses.
Commonly used forms of software and their approximate prices:
Accounting Software:
This includes applications like Xero and QuickBooks.
£12 to £36 per month.
Customer Relationship Management Software:
HubSpot and Salesforce are examples of CRM software.
Up to £50 per user per month.
Project Management Tools:
The category in which tools like Trello and Notion come under.
Up to £20 per user per month.
Software subscriptions are very handy for business growth and effective utilisation of them can help you progress and consistently level up.
However, it is worth noting the subscription prices, which can add up if you’re signed up to several or plan to assemble a big team who need access to CRM software and project management tools.
Good Luck!
We wish you all the best with getting your business up and running. We didn’t go over hidden business costs to deter you, but merely to make you aware of some factors you may not have given much prior thought to.
Planning ahead will steer you in the right direction and help you prepare for the start of your business venture.