Sage published the results of a survey this week highlighting the perceived barriers to starting a new business. It found that while 52% dream of starting their own business, 53% see money worries stopping them from doing so. The ONS recently revealed that over 400,000 businesses were born in 2020. This is the highest annual total since 2017. Of those, 19,465 were tech start-ups, the largest contingent of new start-ups.
The results were based on responses from 2,500, either established or aspiring entrepreneurs. Edelman Data Intelligence completed the survey during December 2020 and January 2021.
Concern over finance top of the pile
With “money worries,” the top concern of wantrepreneurs Enterprise Times asked what that meant. Sage revealed some further findings from the survey.
- 24% said: “I don’t have the financial backing and would need to borrow money.”
- 24% said: “I am worried I’ll lose the money that I would have invested in it.”
- 20% said: “I am uncertain about leaving a stable job/income.”
- 10% said: “I am paying off debt and can’t financially support a business.”
It seems likely that these responses overlapped to an extent. However, 34% of respondents have started their business in the last 12 months. Only 17% of current business owners said a lack of finance was a barrier to setting up their business.
The entrepreneur’s view
If wantrepreneurs can overcome the challenge, real or not of finance, what are the challenges? Jen Walker, Founder of Split Screen Coffee, a Sage customer and entrepreneur, commented: “There are so many myths to break through when you are starting out in business, which can be a real stumbling block. What budding entrepreneurs need, and certainly I did, is real clarity around what was required to start a business: the facts, insight and access to mentorship.
“Having a network of support around me enabled me to sense check with like-minded people and gave me the reassurance and confidence I needed that I could do it. Once you demystify the start-up worries the business road becomes a much easier one to travel on.”
Enterprise Times asked Sage what it does to help with the real challenges raised, specifically around mentorship and advice. Sage responded with four actions it undertook during 2020 and will continue into 2021.
- “Sage hosts a range of free events that facilitate networking sessions – we did this last year at our virtual Sage Sessions and when able to we will host them face to face again. These are a fantastic way for like-minded businesses to share their experiences and make connections. We also facilitate workshops, roundtables all of which we invite our customers to.”
- “Sage colleagues also provide mentorship to businesses.”
- “We also have a range of advice articles via Sage Advice on how to make the most out of mentorship opportunities.”
- “To complement this, is perhaps our work to raise awareness within the government of the issues that SMEs face to engender greater support for them. Whether this is better access to digital skills, calls for more start-up or scale-up support, such as training and mentoring.”
Some insights on entrepreneurs
The survey also may have identified a reason why people are looking to start their businesses. Furlough, redundancy, and reduced hours have impacted 43% of working people during the pandemic. The younger generations are leading the startup creation movement. 61% of entrepreneurs come from Generation A and Millennials (18-34).
Enterprise Times asked Sage how someone wanting to start their own business should approach the issue. The reply was: “The first step to starting your own business should always be the business plan. This involves researching the market, understanding your customer, your product offering, how money will be coming in and how to manage the money that will be going out.
“In addition, many people fall short by not becoming aware of the financial support that is available to start-ups and often feel like they need to go it alone. As you get started, we would always recommend you work with an accountant or investing in technology to manage finances can take some of the pressure off and allow you to focus on the day-to-day management of the business.”
5 questions for Entrepreneurs
There are some key questions that entrepreneurs should also ask themselves before starting a new business. These are:
- Is there a gap in the market?
- What is my passion, hobby, or skill?
- Can I offer something better than the competition?
- Do I have the cash I need to support this adventure?
- What changes, if any, do I need to make to better manage my money or lifestyle?
Sage noted: “These are essential first steps to build the foundation for a successful business. Passion and drive count for so much in business but also listening to insight from others that have already embarked on the business owner’s journey.”
Entrepreneurs also need to listen to their customers’ needs. Ideation is not about the first idea but finding the market gap and meeting the real customer need. The initial product or service might not be the right one, but it can highlight the real customer need. Entrepreneurs need both agility and focus.
Enterprise Times: Whats does this mean
Despite the large number of respondents, the information available within this release, while interesting, was quite light. There is, as yet, no supporting report that dives deeper into the data, which is a shame. With so many wantrepreneurs around, understanding that they are not alone with their fears and myths would be a positive move.
Paul Struthers, Managing Director, UK and Ireland, Sage, noted: “People who dream of creating a business have misconceptions around how much knowledge of accounting, tax, and compliance they need to have before getting started. Sadly, a lot of aspiring entrepreneurs give up their dreams of becoming their own boss, either because they don’t know where to start or they overestimate the amount of money and time required to run a business.
“Preparation is key. Before you launch your company, spend time researching your market and potential buyers, and the financial support options open to you. Test out your products or services in your local community or on social media. Ask for feedback from your friends and family, or social media followers. Getting your finances under control is a key attribute in successful businesses, but this is also the biggest hurdle for most start-ups.”