780,000 businesses were started in 2020, as many people’s work drastically changed or they looked around for something more. Between 2020 and 2021, 13% more startups were formed than in the year before. In fact, more startups are being formed than at any other time in history. Small business is booming. Are you ready to join in?
The challenges you’ll face starting a business
Money
Raising money is hard. If you’re starting a small business, you’ll probably self-fund in the beginning, but when you’re past that point and need to hire staff – what are you going to do?
Your money options:
- Business loan or grant – the government is very keen to pump up our economy right now, so there are lots of grants and loans available. One of the reasons so many people are starting a business right now is the range of financial options available.
- Family and friends loan – starting a business takes a village, and for a small startup, it’s not unusual to raise money through your support network. You’ll still need contracts and terms drawn up by a solicitor because money can always get ugly, however tight your relationships are.
- Equity financing – the most complicated route, but suitable if you intend to raise large amounts and grow fast, equity financing is the process of selling shares in the business to raise capital. For a small business (particularly if it’s just you), this probably isn’t necessary.
Check this government list of business funding programmes across the UK. Your area may have university, council or charity projects dedicated to helping businesses get started.
Doubt
Lots of people will tell you you’re mad, and you’ll tell yourself that, too. If starting a business was easy, everyone would do it.
One thing we’ve learned from the pandemic is that life’s too short to stay in your rut. We’ve had a huge shock to the cultural system, and now is the opportunity to carpe diem.
As long as you’re sensible with finances (hire a financial advisor!), you can push through doubt.
Pace
Starting up costs money, so you want to sprint to the profit part. Unfortunately, that only works if you can commit the resource to tidying up behind you. If you leave a trail of manual processes and later-date fixes behind you, you will reach the point of scale where those little problems become absolutely massive.
Moving fast is important because you want to be first to market and hit profit before you go broke, but keep one eye on the tidying. When you move out of startup phase, you need things to scale easily.
People
We can’t do it all ourselves. We need the diversity of knowledge and skill, and we need more pairs of hands. But with more people come more problems.
Attracting staff
You’ll start with fewer people than you need and continue that way for a long time. One way to attract people to join you for mate’s rates is to give sweat equity. That promises them a stake in the business once they have completed a set period with you.
Sweat equity is intended to give people ownership of the business’s success and incentivise them to stay with you through the tough years. They’re given their equity in percentages by the year, so if they leave before the completion date, they leave with less.
Retaining staff
Another part of moving out of startup phase is losing people. The personalities that were attracted to the beginning phase of development may not want to stick around once things move into the messy, business-as-usual stage.
However, as business owners, we need continuity. When we start hiring new people, we need the old guard to provide the vibe, knowledge, training and mentorship.
For that reason, we have to be prepared for the point at which our first hires need persuading to stay, especially if they have sweat equity reaching maturity. Why should they stay with you, when they’ve completed what they promised?
Promoting people helps, because they keep that sense of ownership. Retention packages help more, because you’ll tie them in for another period. Just don’t rely on loyalty – people can’t pay their rent with loyalty.
There’s never been a better or scarier time to start a business
We’ve all reassessed a lot of things over the last couple of years. Financially, most of us have suffered. But we’ve also had the time to consider what we really want to do with our lives.
If starting a business is that thing for you, you’re in good company. See what your funding options are and get out there.
Good luck.
