Finance · 5 July 2017

Shoestring startups show resilience with a third of companies founded on £250

A smiling and positive hipster man turning an opening sign on glass front door of coffee shop with reflection of street in glass
A lack of funding was cited by 40 per cent of Britons as the biggest barrier to starting a business

A new study demonstrating the long-term potential of shoestring startups founded on tight budgets has challenged the expectation that a business needs significant financial backing to succeed.

The research, undertaken by Yell Business ahead of Independent Retail Week, surveyed 1,500 small UK business owners to find out how much new ventures were costing to launch.

Some 40 per cent of companies were founded on under £500, while a third managed to take off with funds of just £250. Meanwhile, 93 per cent reported they had recorded a profit in the past year.

Yell Business also surveyed 1,500 UK consumers to gain an insight into attitudes towards the entrepreneurial world.

Over half of the population admitted they had considered starting a company of their own – and almost a third unhappy with their current career – but several risks were commonly cited as holding back a new wave of business owners.

With 40 per cent of the vote, insufficient funding was far and away the biggest barrier to starting a business. A risk of failure was also keeping a quarter of would-be founders from following their dreams, while 23 simply didn’t know where to start.

Commenting on the success of shoestring startups, Mark Clisby, Yell Business marketing director, pointed to inherited funds and redundancy as current catalysts for new founders.

“Hopefully, the positive revelations around low startup cost and high success, will give the inspiration needed to budding entrepreneurs, so that they don’t wait for scenarios like this to happen to them,” he said.

Offering pointers to potential business owners, Clisby said thorough research into the market and taking a digital-first approach were crucial starting points.

“From a website, social media to reviews, this is essential for any business in 2017,” he added.

With 85 per cent of founders claiming their own venture had seen at least moderate growth, the evident success of shoestring startups might be enough to spark those ambitions into life.

Putting a shoestring startup on a platform for success

One business owner firmly in the 33 per cent is Neil Bainbridge, founder of music PR firm Neighbourhood, a company that has grown to now represent major clients such as Warner Music and Universal Music Group. Bainbridge recalled some of the key early decisions that shaped the future of his firm to offer some advice to aspiring entrepreneurs.

“Founding a company is of course challenging. There is a huge range of assumptions of what needs to be done and in what order. For example, the early predicament of establishing tone and vision for the company you want to grow into over time, yet creating enough flexibility in the brand to avoid suppressing new opportunities and direction.

“As a service-based company the only additional cost to bear was my own solo time and effort, so 99 per cent of any first expenditure was spent with the above in mind. The same rule would have applied if I would have had access to £250 or £2500.

Bainbridge explained that getting the right first impression – in terms of visual aesthetic, tone and guidelines – was essential in those early stages.

“Making the day-one choice of dropping ‘PR’ in the logo of Neighbourhood was one of these decisions. We never want to dilute what we do as a PR agency, so you won’t find us claiming to be marketeers, creatives, SEO consultants or designers as many so-called PR companies do. We were initially conscious of that first perception.

“Public relations by default is a trade that is constantly moving and redefining itself, so our look and logo always needed to accommodate that.

“From an image point of view, Neighbourhood’s company aesthetic fundamentally needed to support the fact that the best work we do is almost invisible. For the first two years of Neighbourhood, we didn’t have a website. Just a holding page with a logo.

“We are all too familiar with the line ‘dress for the job you want, not for the one you have’. I think laying down the foundations of what can become company guidelines can learn a lot from that.”

Megan Allen, founder of Rural Roots PR, was another entrepreneurial publicist who started her business “from scratch” with just £250 in the bank.

I invested the into the website domain, hosting and some business cards,” Allen told Business Advice, who then had to teach herself to build the company’s website.

“I took a part-time job to help me fund the business as I still had a mortgage to pay, and joined a local networking group. Within three months I’d given up the part-time job and was working for myself full-time,” she added.

I honestly don’t know what I could have done differently and I’m proud of what I’ve achieved in just over a year.”

Sharing her words of wisdom for fellow founders, Allen said: “Learn as much as you can yourself to start with, and when you’ve got some capital behind you, invest in professional services to boost your business even further.”

Instagram founder Mike Krieger shares startup stories with Made in Chelsea entrepreneur

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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