Misconceptions about who can be an entrepreneur and how much it costs to start a business is holding Britain back, writes Eamonn Ives
Picture yourself setting up a business 30 years ago. Depending on the industry you’re going into, a physical office or storefront might be a prerequisite, and you’ll probably have to stock it full of supplies if so. You might need to invest in expensive advertising to drum up awareness, and face the prospect of spending hours doing the books.
Yet today the situation couldn’t be more different. New technology, principally the dawning of the internet, has rendered some costs of doing business obsolete, or at least massively reduced them. Nowadays, entrepreneurs can bag themselves a domain name or piggyback off a sharing economy platform, micro-target customers on social media, and streamline bureaucracy with digital software (some tasks change, but never go away entirely).
Despite this revolution in how businesses operate, most Brits are out of sync with the times. Take the costs of starting a new business. According to new research from the think tank I work for, The Entrepreneurs Network, in partnership with American Express, those of us who have never started a business tend to vastly overestimate how much it costs to launch one.
All told, the average answer people gave when asked how much an entrepreneur needs to start a business was £34,304, and this is only after excluding the 41 per cent of people who didn’t feel confident enough to plump for even a rough figure. Compare this to previous research we carried out, based on insights from actual small business owners, where we found £5,000 might be a more accurate estimate – or just shy of one seventh of what the public reckon on average.
Misconceptions about entrepreneurship go beyond the costs involved, too. Another area where we found a gulf in understanding was with respect to the best age at which to start a business. Perhaps influenced by high-profile examples like Mark Zuckerberg, our respondents believed that 30 is the optimal age to dive into entrepreneurship. Yet, a 2020 study of American founders showed that the mean age at which they founded their business was 42 years old – rising to 45 years old when looking specifically at the fastest growing firms.
A further barrier to entrepreneurship we found was the fear of failure. This is understandable launching a business isn’t for the faint of heart. Most current founders told us they had a good enough understanding of the process of starting and running a business before they launched their enterprise. But even here, a significant minority – one quarter – said they didn’t, but still went ahead and did it anyway.
What’s more, we asked our sample of current founders about whether they had concerns prior to launching. Only eight per cent reported having no concerns at all.
Entrepreneurship isn’t for everyone, and nor should it be. Productive economies, after all, are those which are built upon a healthy division of labour – where workers do what they’re comparatively best at relative to everyone else in society. But at the same time, it’s a fact that startups are engines of innovation and wealth creation. If we’re to continue to harness the unique advantages they confer, myths such as those above must be dispelled.
Thanks to new technologies, it has never been easier to start out as an entrepreneur and launch a business. Now’s the time for public understanding to catch up to our new reality.