It has never been a better time to start a business in the UK, although money worries do persist for those going it alone, according to new research by award-winning cloud accounting software provider FreeAgent.
The majority of UK freelancers and micro-business owners are self-funding their start-up costs rather than relying on external financial support, according to the survey of more than 500 micro-businesses. Almost half of respondents didn’t require any funding to get their business venture started, while 43% had only used personal savings to do so.
With a record number of new business registrations in the past year, Government funded enterprise campaigns such as StartupBritain are helping small businesses to get up and running with little or no external investment.
Additionally, the research showed that just 4% of micro-businesses said they had used a loan from a friend or family member to get their business idea off the ground, while as little as 2% used their credit card or secured a bank loan, and only 1% used Government assistance.
Whilst getting started does not seem to be the problem, the research did find that life can be more of a struggle once those businesses actually get off the ground – with 41% of micro-businesses saying they did not make enough money to cover their costs, or “only just” made enough to cover them.
Many micro-business owners are also focussing their attention on their business at the expense of taking time off – nearly half of respondents said that they had not felt in a position to be able to take a week or more of holiday during the last six months.
Ed Molyneux, CEO and co-founder of FreeAgent, who started his business in 2007, and has grown to more than 100 full time employees, said: “A major barrier for people thinking about starting a business can be the costs involved. They think they’ll need to spend a lot of money from the outset on building the right infrastructure for their business, and the idea of applying for bank loans, grants or other financial assistance is very unappealing.
“But the reality is that the majority of UK micro-businesses don’t actually require this kind of investment from the outset. We’ve found that most of them are either self-funded through the business owner’s personal savings or simply don’t have any start-up costs – and that’s a trend that should give confidence to anyone contemplating self-employment.
“However, it’s important to bear in mind that actually running your own business can still be a tough reality. Many people are only just making enough to cover their costs – or not covering them at all – and don’t even have the confidence to go on holiday.
“It’s in those areas in particular where we believe micro-business owners need help and support. By understanding their finances more clearly, we believe they will be better placed to spot new opportunities to improve their cash flow and gain enough confidence to take a well-deserved break from their business.”
Ed’s top tips for budding entrepreneurs when deciding to take the plunge are:
- It’s all in the planning: the key to not getting caught out in the very first few months is having a clear and detailed business plan. Be sure to understand the costs you will need to fork out to get up and running, and plan for additional unforeseen costs that always seem to crop up when you’re starting out. Having an extra pot of cash to dip into will enable you to be agile in the crucial first few months, and will give your business the best chance of success.
- Find the right mentor: having someone on your side to turn to that has relevant tried and tested experience is crucial. It can be anyone from a former client or family member, to an old colleague or friend that has been through a similar process, and can provide their insight for you to learn from quicker than you will learn on the job. You simply cannot put a price on that, and it will save you from making rash decisions and mistakes when the heat is on.
- Trust your instincts: your business idea will be held up to scrutiny and challenged on every front within the first few months of execution. Go with your gut instinct on the things you feel strongly about; remember it is your business, and if you believe in it strongly, others will too. Don’t allow yourself to be derailed from your mission unnecessarily, and remember, Rome wasn’t built in a day.