Hosting Costs
The expenses associated with hosting can vary significantly, ranging from as low as £1 per month to several thousand pounds. The pricing is influenced by various factors, with server capacity being a prominent one. In our context, hosting encompasses costs such as SSL certification, domain acquisition/renewal, business email services, and the overall maintenance of your ecommerce store.
It's important to emphasize that hosting expenses can differ significantly based on the scale of your ecommerce enterprise. Generally, larger businesses with higher visitor volumes tend to incur elevated maintenance and hosting costs. A standard basic hosting package might include the following elements on a monthly basis.
- Server Hosting - £10 / Month
- SSL Certificate - £0 / Month
- Business Email - £2 / Month
- Domain - £2 / Month
- Maintenance - £10 / Month
Payment Processing Costs
Not everyone is well aware of the expense associated with payment processing, and it can often catch people by surprise. These costs are applicable regardless of the payment provider you choose. For example, Stripe imposes a processing fee of 1.4% + 20p, which, on a large scale, can become a significant expenditure. While there may not be much one can do about it, it's essential to comprehend this almost hidden cost.
It's reasonable to assert that modern payment providers like Stripe are relatively cost-effective when compared to payment gateways offered by major banks. It's not uncommon to encounter situations where thousands of pounds need to be paid upfront, in addition to monthly fees, just to facilitate payments. In our perspective, payment providers like Stripe, with their transparent and straightforward fees, are indeed a valuable proposition. Some of the best options that you might want to consider for payment processing include Stripe, PayPal, Braintree and Square.
If we were to choose one today to start our online business, our preference would be Stripe, given its flexibility, quality, and affordable fees.
Development Costs
Development costs are challenging to determine as they hinge on your specific requirements and the level of customization you seek for your ecommerce store. A ballpark figure for general pricing typically falls in the range of £2000 to £10000, but it can surpass these estimates. Nevertheless, for small to medium-sized businesses, these prices are generally considered reasonable. These costs primarily apply when engaging a development company to handle the project. However, if you possess the expertise or don't necessarily require a highly customized ecommerce store, exploring web builders might be a more cost-effective option. You can undertake the development yourself at a significantly lower cost. To delve deeper into the topic of website builders, you can explore the article on Pros and Cons of Using a Website Builder in 2024.
Keep in mind that web builders often offer lower quality, and you end up paying with your time instead of money. The verdict of which is more valuable is for you to decide.
Marketing Costs
Marketing costs are inherently variable, making it challenging to pinpoint an exact figure. The expenditure is contingent on your available budget, as greater financial investment tends to yield better results. Initiating marketing efforts can commence with a modest investment of a few hundred pounds, with the potential for limitless scalability. A practical approach, once your ecommerce business starts generating revenue, is to allocate approximately 5% to 8% of the overall revenue towards marketing. While this serves as a guideline, it's not an absolute rule. In essence, there is no fixed cost for marketing as it is not obligatory, but having a more substantial budget can significantly enhance the chances of launching your business into success.
Inventory Costs
The relevance of inventory costs depends on the chosen business model. If you opt for a dropshipping store, this may not be applicable at all. However, for a lot of online businesses, the common strategy is to get a significant amount of inventory for resale or manufacture internally. Regardless of the specific method, inventory costs constitute a significant portion of the overall investment required to launch your ecommerce business successfully. The financial commitment towards inventory procurement can vary, and for some, it represents a considerable share of the initial investment, emphasizing the need for careful planning and strategic financial management. Without proper guidance, this investment can easily reach tens of thousands of pounds, especially when aiming to build a substantial stock.
Employment Costs
An additional cost that does not neccessarily apply to you could be costs related to employees. This is more typical when the workload becomes too much to handle by yourself that you need employees to fulfill your customer needs. For this we cannot give an exact figure because it is for you to decide what the work is worth for you. A minimum wage is generally around £18000 anually, however this may not be a sum that attract the employees you are looking for. Try to offer a salary that you find still worthwhile and attractive to employees. A cost-cutting approach may be that an employee doesn't need to be employed full-time; depending on the tasks, it might be sufficient for the colleague to work part-time.
A well-assembled team is often the cornerstone of a successful business, and the attainment of quality talent comes with associated costs.
Additional Costs
In the realm of additional expenses, one must consider items such as accountancy fees and essential hardware requirements, including a business landline, office rental, computers, and any other necessities vital for the smooth operation of your business. While these costs typically constitute a significant portion of overall business expenses, it's noteworthy that in our contemporary world, having a physical office is not an absolute necessity. The alternative is to operate exclusively in the online sphere. Providing a general guide, the costs associated with the aforementioned elements are outlined below. However, it's crucial to bear in mind that these figures are merely initial estimates on a monthly basis and may vary depending on specific circumstances.
- Accountant Service - £70 / Month
- Business Bank Account - £10 / Month
- Landline - £15 / Month
- Office Rental - £1200 / Month
Final Thoughts
It's crucial to note that the prices mentioned in this blog represent baseline costs, serving as the absolute minimums to be taken into account. Variations can be significant from one company to another, and the choice of services can substantially alter these figures. Generally, it is advisable to allocate a budget ranging from £8000 to £25000 for your startup. This budget not only accommodates the initial challenges you may encounter but also provides sufficient capital to sustain your operations for a considerable period, even in the absence of immediate revenue. The high failure rate of most startups is often attributed to underestimated and unrecognized costs associated with running an ecommerce business.