For ambitious women entering the tech space, it’s important not to be blinded by delusions of grandeur. Establishing a tech startup business is not without its challenges, especially for a woman, and one of the most common ones is funding and supporting it.
This process involves more than simply tracking expenses and managing cash flow; this involves building enough financial stability to allow their vision to flourish and empower them to achieve more.
For some, that may come by setting money aside to set up a side hustle while maintaining their current position. For others, their vision may only be achieved once they fully commit and dive headfirst into full-time entrepreneurship. Regardless, strategic budgeting can make a profound difference between burning out early and achieving sustainable growth for your project, however zealous it may be.
What is your ideal tech startup budget?
Before diving into the expected costs of starting a tech business, the important thing is to establish realistic expectations for what you’re trying to achieve. There is no magic number that guarantees success, but research suggests that tech startups can start with as little as £1,000 or under, according to Absolutely No Nonsense Admin (ANNA). That said, this figure can vary exponentially, depending on specific sector(s) of operation, product complexity, audience segment(s), and other factors.
The most important step is to spend time conducting thorough and conclusive market research within your chosen niche(s), and establishing value propositions for your product, service or solution. Find out what competitors have invested, if possible, and what resources they’ve required to get off the ground, which will help you avoid the common pitfall of underestimating costs and, by extension, underpreparing.
On a more administrative note, if you’re going to be working for yourself as a sole trader, George Ide LLP recommends that you prepare for and familiarise yourself with making tax digital (MTD) thresholds. This will ensure compliance as your income grows. From next April, sole traders with annual business income over £50,000 will be required to register and file quarterly income and expense reports to HMRC, and this threshold will drop to £30,000 in April 2027, and £20,000 in April 2028.
Tech startup costs to consider
Technology and software
It can be tempting to over-invest in technology, but resist this temptation and begin with the essential tools and platforms that support your minimum viable product. Simple applications will likely have a lower annual expense than complex, enterprise-wide solutions. Consider whether you need custom development options or if open-source platforms can get you off the ground.
Team
While you don’t need to hire multiple people immediately, consider how complex your offering is and what personnel would help you support it. Contractors and virtual assistants may be able to offer you flexible support and expertise without the burden of salaries, benefits, pensions and so on.
Marketing and advertising
It’s recommended that new businesses spend between 12 and 20% of their revenue on marketing. Consider which channels would offer you the best return on your investment (not just financial, but logistical), whether it’s content marketing, social media marketing or face-to-face networking, or anything in between. Focus on the channel(s) where your target audience is most active, rather than spreading yourself too thin across every possible platform.
Legal and accounting
Set aside enough budget for accounting, bookkeeping, legal advice and consultancy services. These investments will help you tick all compliance boxes and ensure you’re positioned for success.
Short and long-term costs
Immediate costs
- Company registration
- Professional fees (e.g., accounting, licences, legal advice, insurance)
- Standard equipment and product development
- Basic marketing and branding efforts (business cards, single-page flyer, website, etc.)
- Essential supplier partnerships
Avoid investing in large office space, expensive equipment, and widespread team-building until it’s justified.
Mid-term costs
- Scaling activities as your client base grows
- Improving marketing efforts and expenditure
- Expanding your team
- Upgrading your tech stack and infrastructure
- Accreditation and certification from relevant bodies
Plan for variable costs and cash flow that will fluctuate with growth, such as the hiring of new staff and, by extension, ensuring they are legally protected by UK employment laws.
Long-term costs
Build funding projections that will account for sustainable growth while maintaining a healthy cash flow. Consider how your cost structure and possibly your business model will evolve as you move from a startup enterprise to an established business, including potential larger office space and team size, not to mention more sophisticated tech requirements.
Establishing a budget and funding strategy
If you’re self-funding, create conservative projections and maintain strict cost discipline. Focus on generating revenue quickly to reinvest in growth, which will involve managing cash flow more carefully and closely, but gives you more oversight and visibility.
If your aim is to secure external funding, develop detailed and specific financial projections that demonstrate how investment will accelerate growth. Investors will expect to see clear budget allocation and realistic timelines for achieving key milestones, not to mention a suitable justification for every major expense category.
Consider adopting a project-based budgeting strategy rather than tracking expenses month to month, particularly in the early stages. This helps you evaluate the return on investment for specific initiatives rather than viewing any cost as an overhead. Financial modelling tools can help you understand how customer acquisition costs and expense categories translate into tangible business revenue.
A contingency plan is a must-have for your business. Consider a 15-20% buffer for any unexpected large costs, which are quite common and unforeseen in tech ventures, whether it’s due to an unexpected technical integration requirement or an impromptu regulatory change. Establishing this safety net will prevent a minor financial setback from derailing your entire operation.
Remember that creating a budget isn’t just about managing your costs; it’s about building the confidence to pursue your tech vision with clarity, purpose, and peace of mind. When you understand your financial obligations and have planned for numerous scenarios, you can tackle the challenges ahead and focus on what really matters. As your venture evolves, revisit and adjust your projections to reflect what you learn and what the market demands.
