If you’re searching for a budget-friendly business idea, a tech start-up could be just what you’re looking for. While some tech companies require significant investment, there are other business models that can be launched on a very low budget.
If you set yourself up as an IT consultant, for example, you won’t need to buy stock or pay for a production line to be initiated. In fact, there’s a good chance you’ll be able to start working with the equipment you already have.
Of course, there are some business expenses that even tech start-ups can’t avoid. To ensure you’ve got enough funding in place, take a look at the business expenses every tech start-up encounters:
No matter what business model you choose, if you generate profits, you’re going to be liable for the tax. Operating as a sole trader means your business profits will be subject to income tax while forming a company results in corporation tax being applied to your profits. Although there are financially savvy ways to reduce your tax liability, you will need to pay some form of tax on the revenue you generate.
However, your tax liability won’t usually impede your finances until after your first trading year, as your tax payment won’t be due until after you’ve been operating for some time. Despite this, it can be advantageous to set aside a portion of your profits every month to ensure a subsequent payment to Her Majesty’s Revenue and Customers (HMRC) won’t affect your future operations.
Wherever you run your start-up from, you’ll need to have access to basic utilities, such as water, electricity, and/or gas. If you’re working from home, you may be able to offset some of the cost of your utility bill as business expenses. However, if you’re leasing an office or purchasing a separate workspace, you’ll need to arrange for a utility company to connect the property to their framework.
Although you can’t avoid paying for utilities when you’re running a business, you can ensure that you’re not paying over the odds. Finding a water supplier for business, or an electricity package designed for companies can help to reduce your running costs, for example.
Remember – if you want to brand your start-up as eco-friendly and sustainable, the fuel options you choose will have an impact on your carbon footprint and emissions. By choosing to use fuel sourced from renewable energy, you can enhance your green credentials and minimize the impact your start-up has on the environment.
For many businesses, the wages bill is their most expensive outgoing. While a bootstrap business may not have a large workforce to start with, there’s a good chance you’ll need to draft in extra support if your start-up takes off. Of course, it can be hard to reduce the wages bill when you need to offer a competitive salary in order to attract the best candidates.
However, you may not need to hire permanent staff straight away. Becoming part of the gig economy and working with freelancers and subcontractors allows you to access the support and talent you need, without wracking up an expensive monthly wages bill. Instead, you can access ad hoc specialist assistance when you need it and pay freelancers on an hourly basis or per project.
Where you choose to operate from will also have a major impact on your running costs, so think carefully before you sign any commercial leases. Depending on the type of tech start-up you’re launching, working from home may be a viable option. If so, you can drastically reduce your operating costs while you get your business underway.
Alternatively, leasing a shared workspace can be a budget-friendly alternative to hiring an office suite. As well as giving you the space you need to run your business, many shared workspaces are designed for entrepreneurs and tech innovators. This gives you the opportunity to network with people in your industry, in addition to providing the resources you need to operate successfully.
Many new business owners overlook the importance of taking out insurance, but it’s something that could save you a lot of time, money, and hassle in the future. If you employ staff, you’ll be required to take out employers’ liability insurance, but there are numerous other types of business insurance that are worth considering.
Public liability insurance provides cover against injuries to people or damage to property caused by your business operations, for example, while professional indemnity insurance protects against claims of financial loss caused by advice given. Additionally, business interruption insurance can maintain your cash flow if you’re unable to operate, and management liability insurance protects directors and officers from claims made against them in their professional capacity.
Even though there are multiple types of business insurance to consider, policies can be obtained relatively cheaply. As a result, it’s often beneficial to protect your business with a range of policies and give yourself peace of mind.
6. Vehicles and Driving
If your business involves visiting clients on-site or traveling to different locations, you may be able to claim back some or all of your vehicle expenses. However, the regulations regarding vehicle and driving expenses can be complex, so be extra careful when claiming them as a business expense. You might want to invest in good expense claim reimbursement software to ensure all your business expenses are compliant with rules laid down by tax authorities.
If you’re using a personal car for work purposes, for example, you may be able to claim the cost of car insurance, fuel, breakdown cover, repairs, and parking, but only for the costs that are incurred when you’re using the vehicle for business travel.
Reducing Your Business Costs
Even when you’re legally permitted to deduct costs as business expenses, it’s still in your interest to keep your expenditure as low as possible. This enables you to retain a higher percentage of your profits, even if they’ll be subject to some form of tax.
If you’re launching a tech start-up on a budget, it’s particularly important to keep your running costs as low as possible. By doing so, you can minimize the amount of funding you need and maximize your revenue.