An entrepreneur recently asked me for a rough idea on costings for things when you’re setting up a company. So, I thought I’d do a post on it.

I remember the situation well where you’re pulling together a simple model for your first business plan and you just need some cost numbers for basic overheads so that you sound like you know what you’re talking about. Being 100% accurate isn’t that important early on but you really don’t want to look like you don’t know what you’re doing.

Below is a list of costs that give a rough indication of what we spent (or should have spent) in our last start up. These are indicative of a London based start-up that’s looking to pretty much boot strap. I hope it’s helpful.

So, here we go, in no particular order…

Rent

£350 per desk per month (fully loaded) in a serviced office in London (obviously size and location dependant!)

£200 per month in meeting room costs

Insurance

£100 per month (public liability insurance, D&O insurance, etc. etc.)

Legal and Registration

£100 to set up at Companies House

£x domain name registration. Depends on how many countries you go for. You could spend several thousand pounds a year easily. At it’s cheapest it’s probably £200 per year including very basic hosting.

£260 trademark registration

£2000 filing for a patent in the US for a business process

£5-10k for the legals for an angel round (on top of this you’ll probably end up picking up the angels’ lawyers bill also)

£15-40k for the legals for a VC round (on top of this you’ll probably end up picking up a number of costs from the VC’s side also)

Accounting

£200 per month in book keeping from independent book keeper

£2000 per year for annual accounts, tax returns + ad hoc advice from mid-sized accountancy

£50 per month for payroll

Office Equipment

£1000 per person in IT equipment (don’t forget the software licence costs!)

£200 per person in office equipment

£200 per year in consumables

Communication

£50 per person per month for mobiles

£50 per month landline and broadband for the office

Recruitment

10-25% of first year salary depending on how well you negotiate. There’s a strong debate in the start-up world about whether you need recruitment consultants to fill jobs. We found that it was the only way we got to meet quality candidates.

PR

£3-6,000 per month normally for an agreed period of 4-6 months. (Although there should be some good deals to be had at the moment). There’s a constant debate in entrepreneurial circles as to whether this is worth it and whether you should try to do it yourself. Certainly there’s a strong case to be said for focussing on online PR if you’re an online company. Links are much more valuable than passing mentions in national papers.

Product Development

£10k for brand and look and feel development (we didn’t spend this early on but wish we had as we ended up spending it later on)

Tech Development

How much should you spend on tech? How long is a piece of string? We got to a basic working prototype for €40k using offshore developers. You could easily end up spending more or less. We then spent several multiples of that improving the prototype. The best thing to do is to go out and get quotes. I’d happily recommend our developers in Bulgaria. They’re called Melon Tech and were excellent. You can email the CEO, Krum Hadjigeorgiev at krum@melontech.com or call him on +359 (88) 8338642. They’re .net developers and did a great job for us.

Anything else?

If you have any questions on any of this or feel I’ve missed something out, please drop me a line. Similarly, if you disagree with any of it, please let me know also. I’d love to know where we could have done better.

Photo courtesy of Flickr: Jake Wasdin

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