New research has laid bare the financial challenges facing Britain's small and medium-sized enterprises (SMEs), revealing that the average business is launched with less than £6,000 in initial capital.
The Financial Strain on Founders
A study commissioned by Santander, which surveyed 500 SME owners, found that many are forced to rely on personal savings or borrow from family members to get their ventures off the ground. This precarious financial start means that a staggering eight in ten businesses operate on razor-thin margins from the outset.
The data, collected by OnePoll.com, shows that 37% of these new companies were unable to turn a profit for at least three years. Furthermore, nearly half of the owners admitted they had miscalculated the amount of money required to establish and run their business, leading to 85% of entrepreneurs calling for greater funding and support.
Personal Sacrifices for Business Dreams
The cost of starting a business was not merely financial. The research highlighted the profound personal sacrifices made by founders. 45% gave up their social lives, while 40% sacrificed holidays during the early days of their companies.
Other cutbacks were even more stark: 27% went without buying new clothes, and 13% even skipped purchasing birthday presents for relatives, channelling every available penny back into their business. The study also found that the typical entrepreneur sat on their business idea for three years before taking the plunge, with 26% leaving a stable job to pursue their high-risk venture.
Supporting the Next Generation of Businesses
The research was released to mark the Santander X Awards, a global entrepreneurship programme that has distributed more than £1.1 million in funding and assistance to thousands of UK enterprises since 2010.
This year's winners, celebrated for their innovation, include Aeropod by Muju Earth for its biodegradable soil aeration capsules, Boost Innovations Ltd, creators of prosthetic breasts for breast cancer survivors, and Amparo Prosthetics Ltd for its smart, adaptable prosthetic solutions.
Deborah Meaden, who judged this year's final, commented on the findings, stating, "Starting a business is never easy – most entrepreneurs begin with very little and take huge personal risks to get their ideas off the ground." She added, "But if you've put everything you have into starting up, you have to do everything you can to make it work."
Mike Regnier, CEO at Santander UK, emphasised the vital role of start-ups, saying, "Start-ups play a vital role in stimulating growth and innovation in the UK." He acknowledged the difficulties, noting, "With rising costs and competitive access to finance, almost nine in 10 business-owners are calling for more funding and support."
With 55% of owners saying they could not have launched without financial support from others, the advice from seasoned entrepreneurs to newcomers is clear: start small and scale gradually, and do not expect to make a profit immediately.
