Wednesday, February 7, 2024 5:25am
Misconceptions about who can be an entrepreneur and how much it costs to start a business are holding Britain back, writes Eamon Ives.
Imagine yourself starting your business 30 years ago. Depending on the industry you're entering, a physical office or storefront may be a prerequisite, and you'll probably need to keep it fully stocked with supplies. You may need to invest in expensive advertising to increase awareness, and you may spend hours reading books.
However, the situation today is completely different. New technologies, primarily the dawn of the Internet, have made some of the costs of doing business obsolete, or at least significantly reduced. Today, entrepreneurs can acquire domain names themselves, piggyback on sharing economy platforms, micro-target customers on social media, and streamline bureaucracy with digital software. (The task of the department will change, but it will never disappear completely.)
Despite this revolution in the way business is run, most Brits are out of sync with the times. Consider the costs of starting a new business. New research published by Entrepreneurs Network, the think tank where I work, in partnership with American Express, shows that people who have never started a business tend to significantly overestimate the cost of starting a business.
After all, when asked how much money an entrepreneur needs to start a business, people's average answer was £34,304, which is 41 per cent of people who don't feel confident enough to inflate even a rough number. This is the number after excluding. Compare this to previous research we conducted based on insights from real small business owners. There, we found that £5,000 may be a more accurate estimate, just shy of one-seventh of the average for the general public.
Misconceptions about entrepreneurship go beyond the costs involved. Another area where we saw a big gap in understanding was when it came to the best age to start a business. Perhaps influenced by notable examples like Mark Zuckerberg, respondents believed that 30 was the perfect age to jump into entrepreneurship. However, a 2020 survey of U.S. founders showed that the average age at start-up was 42 years old, rising to 45 years old when looking at particularly fast-growing companies.
An additional barrier to entrepreneurship we found was fear of failure. It's no surprise that starting a business is not for the faint of heart. Most of today's founders say they had a good understanding of the process of starting and running a business before launching their business. But again, a sizable minority (one quarter) said they didn't, but still did it anyway.
Additionally, we asked a sample of current founders if they had any concerns before launching. Only 8% reported not having any concerns at all.
Entrepreneurship isn't for everyone, nor should it be. After all, a productive economy is one built on a healthy division of labor, where workers are able to do what they are best at relative to everyone else in society. But it's also true that startups are engines of innovation and wealth creation. To continue to take advantage of the unique benefits they offer, myths like these need to be dispelled.
Thanks to new technology, starting out as an entrepreneur and building a business has never been easier. Now is the time for public understanding to catch up with our new reality.
