Welcome to our fifth and final blog post for 2010’s Global Entrepreneurship Week. Thank you all for reading and for your terrific contributions – it’s been great to see the coverage and level of engagement at a time when GEW couldn’t be more significant.Today’s post is looking at the myth that you need a lot of money to start a business. For many thinking of starting out in business finance can be either the first or the final stumbling block. Today’s entrepreneurs prove that it doesn’t need to be. Admittedly some businesses wouldn’t get off the ground without investment but persistence, determination and creativity are often enough to overcome any financial obstacles.
Read on below for the experiences and opinions of those involved in the If we can, you can community and the Entrepreneurs’ Forum.
If you have a story to share, please leave your comments here, or visit our Facebook page to take part in the debate. We know there is more than one side to every story so if you have an experience or opinion about any of these myths we’ve been talking about this week, please do get involved and air your voice.
Myth 5: You need a lot of money to start a business
Mark Ions, Exclusive Human Resources: “When I started out, I didn’t have a bottomless pit of money by any means; my family and I risked everything to do this. We had to make sure that we could survive for the first three to six months because there was no guaranteed income. We didn’t forecast any figures for those months; it would have been unrealistic since no one knew who we were. But we did reduce all of our outgoings just to make sure we could survive. I did things like borrowing my granddad’s old car and that really helped take the pressure off for that first period.”
Judith Addyman, RDA Ltd: My husband and I started the business in March 2007 following joint redundancy. We very quickly realised that we would both either have to sign on the dole or do something quick to earn some income.
Our initial “getting our first job off the ground” proved to be quite a bit of a challenge. We needed to invest a substantial amount whilst having no trading history or credit accounts set up with our suppliers. We managed to overcome this by being totally honest and managing to persuade our very first client to fund the project up-front for us! This was a £450k food court on the end of Brighton Pier and the client was the Noble Organisation!
John Hays, Hays Travel: “I started with a blank sheet of paper. I didn’t have an expertise in anything really, but I had a whole lot of ideas which I thought might be business worthy, so I just wrote them all down.
My criteria was that it couldn’t need a lot of working capital because I simply didn’t have any, it needed to be a growth business, and it needed to be one where I hoped I could have fun.
One idea I had was to be an undertaker. I’d done a bit of research: the margins were good and it was a nice, steady business. My dad was a joiner so he could make the coffins. But it failed on the third criteria of having fun.
I decided to choose travel as my business as it fulfilled what I wanted to do. It would be a very low cost start up because my mum had recently opened up her own children’s clothes shop and she gave me some space at the back to set up the agency.
My dad built a divide and a counter as well. It was a bit rough and ready and people snagged their clothes as they walked past. All in all the company had pretty humble beginnings.”
Callum Miller, Turbo Connect: I am 43 and married with 3 kids and a mortgage, so when a close friend who had seen what had happened suggested I start up on my own, we both had a laugh about it, as I had no finance and no savings.
It's a passing comment like that, which can completely change your whole life. The seed was planted, I searched on the net for tools and machinery, I knew what I needed, and I also knew all the contacts from my previous employer.
It was then the idea was born to start my own turbocharger remanufacturing business, small scale to start with ( very small scale) I did all my own research, bought units to strip and train myself, sourced consumables, tools and equipment, even started market research and projected cash flows.
I started with nothing and I’m very happy to have done everything on my own, with the full support of my wife, family and friends.
It can be an uphill struggle, a very steep hill, especially when banks will not back you, even though you're making money, you just have to keep going, as it will get harder once you're self employed. I have to say the fight is well worth it though. 100%"
Chris Quickfall, Invate: “After quitting the job I had no money coming in, so I was living on credit cards. I was outlaying all this money but had no idea when it was going to come back. I became poorer than I was when I was a student which I didn’t think was possible. My business was the kind that needed a lot of investment at the start to get it off the ground and I had started completely from scratch.
All my friends from engineering got good, well paid jobs when they graduated. As they were buying TVRs I was thinking, I could afford to buy a few TVR’s with all of this debt.
Trying to set the business up was a bit like being a rabbit caught in the headlights. But that was partly because I vastly underestimated how much support there is out there. We managed to raise finance from the likes of Business Link and Project North East. Prince’s Trust supported us in the form of both loans and grants.
We used that money to go to a bank and say, we’ve got this much through government organisations, can you double it? It was the first time I’d ever negotiated with a bank, and I’d more or less gone in as a student and said, “Can I have some money for free?” After a while though we got the banks to put in some money on top of what we had already.
We used that money to go to another bank to do what’s known as invoice financing. We had some money, but we didn’t have enough to buy, sell and sit and wait for a month for somebody to pay us. So what we did was basically sell our credits to a bank, and they’d give 90% of it back immediately and 8.55% back once our customer paid. That allowed us to have enough working capital to support the business and enable it to grow. We could increase sales without being concerned that we’re going to run out of money in two weeks time. That was one reason that allowed us to grow the company so fast.”
Kate Welch, Acumen Development Trust: I started Acumen Development Trust in 2003 with literally £10 in the bank. We started by using various contract funding to deliver the programmes. I was running the company as a volunteer director and a chair of trustees, and we were very enterprising in the way we tried to make things work as a business.
We found that we’d turned over £400,000 in the first year, with no full time management in the organisation. We were even doing the accounts on an Excel spreadsheet. We thought, we have to do something here.
I went to the Northern Rock Foundation who invested in us by putting £750,000 of funding into what we did for a three year period. It enabled me to run the organisation full time, without other organisations taking a cut from the programme, and the money would go to people in the local area. We would be based on a proper business model and that would allow us to get the best for people."
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