How much money do you really need to start a business? – Research suggests not much at all.
A recent survey of entrepreneurs has found that many successful business owners started their business on a shoestring budget of £1,000 or less.
The study conducted by start-up community Shell LiveWire, surveyed 241 entrepreneurs and over a quarter of these reported spending less than £1,000 in the first year of their business launching.
24% spent less than £5,000, whereas only 6.7% spent over £100,000.
The survey also looked at the methods that business founders used to finance their start-up, with the overwhelming majority (nearly three quarters) reporting that they had used their own savings.
30% reported borrowing money from friends and family, whereas only 10% said that they had used a bank loan.
Interestingly, less than 5% raised the capital through crowdfunding or through re-mortgaging their home.
Although only 56% of respondents started their business alone, the majority recommended that would-be entrepreneurs seek a business partner to increase the level of support available and gain access to a wider skill set.
20% of those surveyed said that they started their business with a friend and 7% worked with a business partner that they hadn’t known prior to the venture.
According to the survey, a third of business owners had a household income under £25,000 a year before their business started and according to a report by Experian, this figure has risen significantly since 2009 when it was less than a quarter.
7.7% of business owners lived in social housing, which is more than double the number for 2009, suggesting that modern-day entrepreneur is less likely to rely on assets such as their homes to raise start-up capital.
At a time when the public sector faces cuts, the UK government has championed start-up businesses, recognising that entrepreneurs are vital for economic growth.
It reported this year that 25,000 new businesses are supported by Start Up Loans, an initiative that provides financial support and mentoring to entrepreneurs looking to set up their own business. According to the Start Up Loan Company more than 32,000 new jobs have been generated as a result of the scheme since it was launched in 2012.
It is estimated that of 5.2m businesses in the UK, that small businesses account for 99.3% of private sector organisations.
Almost a third (3.3 million) of all UK businesses are sole proprietorships.
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