Funding is a significant barrier for would-be entrepreneurs but new research has found that most people think that business start-up costs are far higher than they really are.
It's more affordable to set up a business than most people realise, according to the findings of a poll conducted by Opinium for American Express and The Entrepreneurs Network. The survey of over 1,500 adults and 250 UK business owners shows that, on average, Brits estimate that it costs £34,000 to start a business, when the reality is around £5,000 according to previous analysis by The Entrepreneurs Network.
It means the British public are overestimating start-up costs by almost 600%. What's more, one in seven think it costs more than £50,000 to start a business. Misunderstanding on costs may be preventing would-be entrepreneurs from starting their own businesses, with lack of funds (27%) found to be the biggest barrier for people. This is followed by the absence of a solid business idea (21%) and reluctance to take risks (20%).
"You don't have to be a rich whizz-kid to be an entrepreneur, and the more people that understand that the better." Philip Salter, founder, The Entrepreneurs Network.
Why starting a business is the smart choice
The study has found that those willing to make the leap are reaping the rewards, with 67% of entrepreneurs polled saying that they've made more money as a result of setting up a business than they would have done if they'd chosen an alternative career path. Other reported benefits include the freedom to manage their own work (51%), having a better work-life balance (42%) and feeling happier and more fulfilled (38%).
Encouragingly, the research found that the majority of entrepreneurs are also willing to "pay it forward" and support budding business founders, with 75% stating they would be comfortable lending money to friends and family to start a business.
Starting a business while young is best, according to the findings. About two-thirds (65%) of entrepreneurs polled and half (53%) of the public said the best time is when you are aged between 18 and 35 - with the optimum age, on average, at just over 30 years' old.
"Entrepreneurs and the businesses they create deliver huge value to our society and the economy. However, our research shows there are significant misconceptions around how much financial firepower is required to start a business. But what's clear is the many benefits felt by those who have made the leap." Stacey Sterbenz, general manager, UK Commercial, American Express.
Public support for entrepreneurship
The survey also found strong support for entrepreneurship among the general public:
- 86% of people say entrepreneurs make an important contribution to the economy;
- 61% agree that entrepreneurs deserve the money they make;
- 36% say successful entrepreneurs' accomplishments are because of effort;
- 12% put entrepreneurial success down to luck.
The research informs a new report, Entrepreneurs Unwrapped, published by The Entrepreneurs Network in collaboration with American Express.
Written by Rachel Miller.