Newly rebranded Zempler Bank research shows average cost of starting new business at…
Today Cashplus Bank has rebranded to Zempler Bank, a new name to reflect the company’s focus on making money simpler for the UK’s microbusinesses.
The most recent data from the Department for Business and Trade shows that microbusinesses (0-9 employees) and sole traders make up 5.3m of the UK’s 5.5m SMEs. As part of the launch, Zempler has published new research to understand the personal, practical and financial obstacles of setting up a business in the UK; and the factors that motivate UK entrepreneurs to “take the leap” in the face of those challenges.
Lift off?
The average microbusiness requires £16,000 to start up. For sole traders, the number is slightly lower, but still considerable, at £11,500. Laying hands on those start-up costs is crucial and over six-in-10 (62%) of micro-business owners were able to start their business by accessing an average of £11,000 of personal savings. A further 13% approached the “Bank of Mum and Dad”, seeking a loan or a gift of – on average – £6,400 to help fund their start-up. By comparison, only 7% sourced funding through a business loan – highlighting the challenge startups face when dealing with high street banks. Just over one-quarter (26%) said no funding was required to start their business.
Hopes and fears
The research shows the biggest drivers of starting a business are not financial, but a sense of ambition, purpose and control. Almost half (48%) said flexibility in work hours and lifestyle, while 47% stated the desire to be their own boss were the main factors for starting up. Four-in-ten entrepreneurs wanted to pursue a passion and just over one-quarter (27%) saw the opportunity for better money.
However, different entrepreneurs highlighted other concerns too. Over one-fifth (22%) of female entrepreneurs highlighted worries over caring and family responsibilities. A lack of access to finance was considerably higher among Asian British (36%) and Black British (29%) entrepreneurs compared to 19% of white business owners.
Given the financial risks being shouldered by start-ups, it is no surprise that fear of failure is the most common personal barrier encountered during the start-up phase. Entrepreneurs also highlighted a lack of understanding of tax regulation (32%), managing finances (27%), the loss of a previously steady wage (23%) and a lack of access to funding / capital (22%) demonstrating a financial tightrope that entrepreneurs face when starting their business.
It is perhaps no surprise that 30% of entrepreneurs said that they found the process of starting their business harder than they had anticipated.
Hurdles
Once their business was up and running, the top three threats business founders face are all financial. 44% identified a lack of access to funding as a “significant threat”; 37% found their poor credit holding them back; just over a third (34%) found the immediate financial impact of starting a business hard to overcome.
Regrets?
Over one-quarter (26%) of microbusiness owners have previous experience of starting up a business of their own. Some of these business exits were success stories – either leaving the business to someone else or selling up. However, 57% of the prior businesses closed permanently – many of these old businesses could potentially have been saved. Of these businesses, 33% closed the business voluntarily to do something else while 24% closed it due to the business not being financially viable.
Perhaps the strongest sentiment is that when asked about their experience in setting up their business to where they are now, an overwhelming 83% say they have no regrets in starting their business and 86% say they love working for themselves.
Friends and family are the biggest sources of support across all businesses. Interestingly, among young entrepreneurs, social media and podcasts play an instrumental role with 28% of 18–30-year-old entrepreneurs citing it as their biggest inspiration.
The survey covered a representative sample of over 1000 microbusiness owners across the UK, covering sole traders to SMEs employing up to 10 people.
Rich Wagner, CEO at Zempler Bank, said ““Entrepreneurs are resilient, willing to take on challenges and risk without a guarantee of reward. The last thing they need is more barriers, from policy makers or an outdated legacy banking system that too often doesn’t want to do business with them.”
“I started what is now Zempler Bank, as I saw firsthand starting my own business the difficulties faced by businesses dealing with high street banks. Our new brand represents a renewed focus on our mission to make life and money simpler for those microbusinesses. The needs of these businesses are generally simple, but that doesn’t mean it’s easy to serve them, in fact they are woefully underserved. That’s why we are so focused on this market and on meeting those simple needs with accessible, easy-to-use banking and lending products backed up by knowledgeable, human customer service.”
