Why NOW is an exciting time to start a business
In an interview with BBC London, Startups.co.uk founder David Lester talks business opportunities, franchising, and why there’s “never been an easier time to raise finance”
With Small Business Saturday and independent shops on the agenda in recent weeks, the BBC turned to Startups.co.uk to assess whether now is the right time to start a business.
Speaking to BBC London’s Robert Elms, Startups.co.uk’s founder David Lester, who started his first business aged 22, talked challenges, opportunities, and why it’s an exciting time to start a business.
Robert Elms: Are there lots of people starting a small business at the moment?
David Lester: Yes definitely, a lot of people are in a situation where they think ‘I’ve got nothing else to do’ or ‘I’ve got nothing to lose’ so may as well have a go, but it’s more than that – I think the trends are encouraging for small businesses.
As the big companies get bigger and become more focused on what the majority of people want they leave gaps that small businesses can fill.
RE: What makes for a successful small business?
DL: In general terms if you give customers what they really want and when I say customers I mean your customers, the people you’re trying to reach, and you get your numbers right then you’ll do fine.
Often people do that to start with but then they lose track of their customers or they get distracted. The hard part initially is to ask yourself ‘Is there a viable market?’ Are there enough people who will pay decent money to cover your costs and earn yourself an income?
RE: How do you do those sums?
DL: Research is key. It’s an easy word to use and sounds like a grand word but really all it means is looking around at other people who are doing something similar and trying to work out if there’s enough market share to go around. It’s really about judgement, running your own business is always about judgement.
RE: So you have an idea and then you do some market research – is that always the process?
DL: We find more and more people come to our website, Startups.co.uk, who are fed up of working for other people and want to run their own business, but they’re not sure what to do. You don’t necessarily need to have a burning gem of an idea. The world of franchising is growing fast. Franchising is now one of the biggest employers in the country.
RE: Is a franchise of a chain really a small business?
DL: Franchises are very much small businesses. Some are chains but a lot are small franchises, with 15-20 outlets around the country and they’re not all shops, there’s lots of varied opportunities.
RE: What impact has the internet had on start-ups?
DL: You can view the internet as a threat or as a friend and it can be both. Increasingly the rise of the digital trend can threaten some industries. I publish books and we sell less of them than we used to, but on the other hand people still want the same information but they go to the internet for it and that’s an opportunity for me to go out there and give them that information in a different way.
There are new opportunities to create brand new businesses. In addition, for anybody creating any business the internet has so many tools available to help you get started.
The BBC’s own Kate Russell has a fabulous book called Working the Cloud which talks about all sorts of cheap and free online tools for your small business that didn’t exist 10 years ago. The internet has helped make it easier and better to start a business.
RE: What about the tricky paperwork element of running a business?
DL: Accounting is probably the biggest part of starting a business that most people don’t know anything about. The truth is the majority of people who start a business are really good at one thing, and not so good at most other things, whether it’s marketing or sales, but finance is always the scariest unknown to broach.
There’s a company called FreeAgent who offers online accounting software for small businesses and they make accounting approachable and accessible. There are lots of web-based tools now that can make challenges like accounting easy.
There is a hurdle to go over and if you’re not willing to go over that hurdle I don’t think you should be running a business because you do need to have an understanding of how all elements of business work, including accounting, but there are tools to help.
RE: How difficult is it for start-ups to raise finance?
DL: For a good business idea there has never been an easier time to raise finance! There are crowdfunding platforms like Crowdcube setting up that allow you to raise money from the crowd and from your peers. Crowdcube’s average investment used to be £1,000 and now its £3,000 but they also have people who invest £10-£50. Collectively it all adds up.
There’s also companies like MarketInvoice that allow businesses to auction their unpaid invoices to global investors.
In general, there’s a variety of new and exciting ways to raise money but traditional lending from banks is also still a good option.
The banks get a lot of hard press because collectively they’re lending less money but there are also fewer businesses seeking finance. A large proportion of loan applications are successful.
You need to have a decent business plan, it doesn’t need to be a masterpiece but it needs to be sensible and viable.
We talk to the big banks regularly and they really do want to lend money to small businesses, partly because they’re under a lot of pressure to do so but also because they make money from it. They do want to lend but they don’t want to lend to bad causes.
RE: What percentage of people who start businesses are successful?
DL: Starting a business is risky, but most viable businesses are successful. If you’ve got a good idea to start with and you’ve followed up with the right hard work you have a good recipe for success.
I think a lot of the businesses that fail – fail because they didn’t realise quite how much hard work it would be, or because they didn’t have the right idea.
David Lester was speaking to the Robert Elms radio show, BBC London 94.9, on Small Business Saturday, December 7, 2013. Having launched Startups.co.uk 13 years ago David is in the process of launching his latest start-up