When starting up your own business, one of the main concerns for many is how much it will cost to turn an initial idea into a reality. But what if someone told you that funding a start-up doesn’t need to break the bank?
According to new research, if you’re starting up a business with little or no money, then it’s not a problem.
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 a new survey of more than 500 small businesses, almost half (44%) of respondents didn’t require any funding to get their business venture started, while 43% had only used personal savings to do so.
The survey, by accounting software provider FreeAgent, revealed 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.
With a record number of new business registrations in the past year, Government funded enterprise campaigns such as Startup Britain are helping small businesses to get up and running with little or no external investment.
Ed Molyneux, CEO and co-founder of FreeAgent, 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.
“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”.
With Small and Medium-sized Enterprises (SMEs) combined annual turnover equating to £1.8 trillion, 47% of all private sector turnover in the UK, according to the Federation of Small Businesses (FSB), it’s never been a better time to start a business in the UK. However, money worries do persist for those choosing to go it alone.
Whilst getting started does not seem to be the problem, the research found 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 (44%) 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.
Mr Molyneux added: “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 Molyneux outlines his three top tips for budding entrepreneurs when deciding to take the plunge:
- 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.