Fylde coast entrepreneurs are being stung by unexpected expenses during the first year of starting a business with serious consequences for growth.
A new study from online business service, Geniac, reveals the average startup invests £22,756 in its first year to cover essential business administration costs, including accountancy, company formation, HR and legal services.
Yet those thinking of starting a business underestimate these expenses by £2,525 on average. However, the consequences for this miscalculation will vary, as the report also uncovered the different costs of starting and running a business around the UK.
The North West of England came in as the third most expensive area in the country for new businesses. The average small business in the North West shells out a third more compared to those in the South East. Businesses in London and the North East shell out the most , with startups spending £30,211.
The largest business administration outlay is associated with ‘company formation’ (including company set-up, drafting articles of association, board minutes and shareholdings). This reaches £6,378 on average or 28 per cent of the total amount. However, the cost would-be entrepreneurs are most likely to underestimate is accountancy fees, with those surveyed budgeting £1,723 less than the amount existing business owners actually incurred in their first year.
The Government estimates that more than 350,000 new businesses launch in Britain each year, but around half will fail in the first five years.
Geniac’s research shows that nearly two-thirds (64 per cent) of small business owners say they get hit with unexpected costs.
Mike Galvin, co-founder of Geniac, said: “It’s concerning that startups and small businesses are not only losing profits and staff but are readjusting growth plans because they’ve underestimated the cost of starting up. It’s even more worrying that they are over-paying in nearly every area of administration.”