By Daniel Hunter
The average cost of starting a business in the UK is £312, significantly less than the average UK weekly wage of £442, according to a survey of micro-business owners by online freelance marketplace PeoplePerHour.
For thousands of people, starting a business is a dream that never comes to fruition because of the perceived obstacle of funding the venture. But figures show that starting a business from scratch doesn’t have to cost your life savings, with more than three quarters (76%) of micro-businesses launched with less than £2,000 of start-up funds.
The results of the survey into start-up costs comes in the same week that Lord Young, the prime minister’s enterprise adviser, published his ‘Growing your Business’ report, and stated that this is a ‘very good time’ to start a business.
However, initial costs such as renting an office and taking on staff can put tremendous strain on small businesses at the outset and in the critical first year of operation. But the modern, mobile business owner can utilise flexible working practices, using remote freelance staff on a project-by-project basis, rather than committing to full-time staff.
And according to those micro-business owners polled, 86% said they were ‘spare room’ start-ups, running their businesses from a home office, rather than from a serviced office or shared workspace. Also, rather then giving up their jobs and putting a strain on their finances, more than a third of micro-business owners said they started their businesses while they were still working.
How did people fund their businesses? From a variety of sources, with 76% using personal savings, 20% asking for help from friends and family, while 13% used their redundancy money. Only 2.5% of those business owners polled secured a bank loan. Similarly only 2.5% received a grant of some description and just 0.8% had help from a private investor.
In Lord Young’s report, he recommended extending the government-backed Start-up loans scheme to those micro-business owners over the age of 30.
According to the figures, six in ten (61%) micro-business owners were over 30 when they started their business, which means they wouldn’t have been able to apply for the Start-up loans scheme. More than a quarter (28%) polled were actually over 40 when they launched their start-ups, and 11% were over 50.
What micro-businesses have Britain’s budding entrepreneurs launched? Almost a quarter (24%) of start-up micro-businesses launched in the past year have been internet-based, while technology (14%), design (14%), marketing and PR (12%) and professional service (11%) businesses also featured strongly.
“Starting a business is now most definitely open to anyone. You don’t have to be from a wealthy family, have a background in finance or have started on your entrepreneurial journey while in your teens," Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, commented.
"The online revolution means that it’s never been easier or cheaper to launch a business at any time in life. You can market yourself and find new business leads online, recruit skilled freelance staff online and then manage them remotely, and even seek expert advice when you need it through online platforms.
“The outdated belief that it takes thousands of pounds of start-up capital to launch a business is simply not the case any more. A large number of micro-businesses are launched from home offices with very limited funds.
“For most businesses the first year is generally the make or break year, and many companies fail because they have cash flow issues. But now big expenditures such as office and staff costs can be controlled. Businesses can adopt more flexible working practices, tapping into a global pool of skilled talent through online freelancer platforms and only hiring staff when they need them for specific projects, rather than recruiting full time employees, and facing having to still pay salaries during quiet periods.
“Similarly with office costs, the modern business owner can run operations from a home office, or even on the move, managing a remote workforce without having to pay for additional desk space. Businesses are being launched and grown from kitchen tables across the country, as the online revolution has knocked down any barriers to entry.
“Starting a business from scratch is no longer the daunting prospect it once was. The internet has given everyone access to a global marketplace of opportunities and expertise - and that should encourage a lot more people to give it a go.”
Join us on