Experian have reported that there are more first-time business owners in the UK than ever before.
However, these “debut directors” have to contend with less start-up investment than ever before, with an increasing proportion coming from levels of affluence that are “lower than average”.
515,000 businesses were created in the UK in 2013, up 8.9% from 473,000 in 2012, with the number of first-time business owners rising by 12.6% at 304,000 in 2013 compared to 2012’s 270,000.
“Debut director” refers to an individual listed as a first time company director. Those in 2013 had less start-up capital and tended to come from a lower than average affluence band in terms of income, property value and net worth.
Nonetheless, business survival rates have improved year on year, up to 87% from 2011 compared with 76% from 2009.
Survival rate measure the number of businesses still trading in the two year period after start-up, observing businesses that have survived the 2011 – 2013 period. Less affluent “debut directors” have a marginally lower than average chance of two-year survival, at 84%, though these chances can be improved through a savvy and realistic approach to business and credit management.
Managing director of Experian Business Information Services, Max Firth, said:
“These figures suggest a shift in how we should view the average UK entrepreneur. It’s not all high-tech start-ups and Dragons’ Den-style big ideas.
“An increasing proportion of new business directors are making the most of the lower start-up entry levels; grabbing a mobile phone, a laptop and a flexible workplace, and creating their own jobs and their own opportunities.”
Firth carried on to say that while this all time high in the number of debut directors should be cause for celebration, there is still much to be done to improve chances for first-time business success:
“Some may still lack the experience, capital and contacts needed to survive those first few tricky years. So it’s crucial for young entrepreneurs to tap into business support networks for advice and they shouldn’t underestimate the value in partnering with a more experienced director if they can.”
Additionally, it is crucial that debut directors are aware of how other perceive their business, as well as the impact that negative perceptions can have in terms of limiting their access to commercial services and potential funding opportunities.
Experian has offered the following advice to first time directors:
- You don’t have to go it alone: It may be advisable to try to find a partnering director, especially if you are able to partner with someone who has previously experienced start-up success to act as a mentor.
- Businesses started by two people or more have a greater chance of survival.
- Know your sector: There are many successful firms even in vulnerable sectors, just as there are many companies in growing sectors that do not perform well. The key is to ensure you have a good understanding of the risks and challenges of the target sector.
- Know your area: Make sure there is local demand for the service or product if targeting a specific region. Investigate all available finance options: Don’t just rely on overdrafts, bank loans or personal sources of cash. Investigate alternative sources of finance, such as crowdfunding, angel investments, business cash advances and government grants.
Words: Peter Cribley