A lack of understanding for what it takes to start a business has led budding entrepreneurs across the UK to overestimate start up costs, new research suggests.
Brits currently estimate start-up costs to range from £34,000 to more than £50,000, according to new research by American Express and think tank the Entrepreneurs Network, but previous numbers suggests it is far less.
An analysis from the Entrepreneurs Network in 2021 revealed the average cost for starting a business is around £5,000.
Even now, with inflation and current economic circumstances to consider, Philip Salter, founder of the Entrepreneurs Network, said: “You don’t have to be a rich whizz-kid to be an entrepreneur.”
“The more people that understand that the better,” he continued.
The research suggests a misunderstanding could be to blame, with 27 per cent of the 1,541 surveyed saying a lack of funds is one of the biggest barriers to starting a business.
Dana Denis-Smith, founder of legal services business Obelisk Support, started her business in 2010 with a budget of only £500.
Dana Denis-Smith, founder of legal services business Obelisk Support
Now – some 14 years later – she told City A.M. if she started all over again, she could do even more with the same budget, thanks to technology and the rise of social media.
“It’s important to debunk the myth that it costs tens of thousands of pounds to start a business – the reality is it can be much less,” Denis-Smith said.
“The UK could be losing out on great new business ideas because people don’t feel they have the necessary capital to start out,” she added.
Stacey Sterbenz, general manager of UK Commercial at American Express, said: “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.”
What’s “clear”, however, is that those who “made the leap” are seeing the risks pay off, Sterbenz said.
Indeed, 67 per cent of entrepreneurs surveyed said they made more money from starting a business than they would have on a traditional career path, with 51 per cent praising the “freedom” that comes with it.