Misconceptions about who can be an entrepreneur and how much it costs to start a business are holding Britain back, writes Eamonn Ives
Imagine starting a business 30 years ago. Depending on the industry you’re going into, a physical office or storefront may be a prerequisite, and you’ll probably need to stock it full of supplies if so. You may have to invest in expensive advertising to increase your awareness and face the prospect of spending hours writing books.
However, today the situation could not be more different. New technologies, primarily the advent of the Internet, have made some of the costs of doing business obsolete, or at least significantly reduced them. These days, entrepreneurs can take ownership of a domain name or leverage a sharing economy platform, micro-target customers on social media, and streamline bureaucracy with digital software (some tasks change, but never completely disappear).
Despite this revolution in the way businesses operate, most Britons are out of step with the times. Consider the costs of starting a new business. According to a new study from the think tank I work for, The network of entrepreneurspartnered with American Express, those of us who have never started a business tend to greatly overestimate the cost of starting a business.
In total, the average answer people gave when asked how much an entrepreneur needs to start a business was £34,304, and that was only after excluding the 41% of people who didn’t feel confident enough to settle for an approximate figure. Compare this to previous research we’ve conducted, based on information collected from real small business owners, in which we found £5,000 might be a more accurate estimate – a little less than a seventh of what the public estimates on average.
Misconceptions about entrepreneurship also extend beyond the costs involved. Another area where we have seen differences in understanding is around the ideal age to start a business. Perhaps influenced by high-profile examples like Mark Zuckerberg, our respondents believe that 30 is the optimal age to launch into entrepreneurship. Yet a 2020 study of American founders showed that the average age at which they started their companies was 42 years old – rising to 45 years old when looking specifically at the fastest-growing companies.
Another barrier to entrepreneurship we saw was the fear of failure. It’s understandable that starting a business isn’t for the faint of heart. Most current founders told us they had a pretty good understanding of the process of starting and running a business before launching their business. But even then, a significant minority – a quarter – said they hadn’t done it, but still went ahead and did it.
Additionally, we asked our sample of current founders if they had any concerns before launching. Only eight percent said they had no concerns.
Entrepreneurship is not for everyone, nor should it be. After all, productive economies are those that rely on a healthy division of labor – in which workers do what they do comparatively best compared to everyone else in society. But at the same time, it is a fact that startups are engines of innovation and wealth creation. If we are to continue to harness the unique benefits they confer, myths such as those discussed above need to be dispelled.
Thanks to new technologies, it has never been easier to become an entrepreneur and launch a business. It is now time for the public to understand their delay in the face of our new reality.
