Fifth of Firms Start Up for less than £1,000

A fifth of small-business owners started their firm with less than £1,000, new research from a telecommunications firm has highlighted.

The XLN Telecom study of 500 entrepreneurs, which looked at how business owners funded their operation, also found that the majority (64 per cent) had drawn money from their personal savings to get up and running.

Bank loans were the next most popular route (27 per cent), while one in fifteen had been helped by friends and family. Just four per cent had received support from investors at the start-up stage.

“Many of the most successful businesses are founded on minimal start-up capital saved or borrowed from friends and family,” said XLN Telecom founder, Christian Nellemann.

“The popularity of shows such as Dragons’ Den highlights that Britain is a nation of entrepreneurs, comfortable to take on the risks of going it alone.”

According to Kevin Horne, chief executive of business support agency NWES, starting a business does not necessarily require huge amounts of initial investment.

“This is particularly true for web-based businesses or where a new venture relies upon an individual’s trade — such as painting and decorating or hairdressing. The person is likely to already own the tools of the trade and be able to draw on their contacts.”

Horne added that the biggest expense for most start-ups was likely to be their premises.

“It may be more sensible to look at working from home at first, or using ‘virtual’ office space which gives you a business address without the overheads,” he said. “Until you get established, the priority should be to save every penny.

“Budding entrepreneurs should also carry out as much market research as possible beforehand, while advice agencies like Business Link could help those looking for support with a business plan and realistic costings.”

He said poor financial control was the biggest pitfall for most early stage businesses.

“Credit control is the area most people hate, but it’s one of the most important. The biggest number of business failures is down to cashflow drying up, so making sure you get paid is vital.”

Fifth of Firms Start Up for less than a grand

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