Is now the right time to start your business?
Here's a few things to consider before you take the leap.
Despite recessions, high unemployment levels, and business failures, you may be surprised to know that a crisis can also create entrepreneurial opportunities.
Read on below to find out more....
Would anyone really start a business in the middle of a global pandemic?
This is a question asked by many amid the economic gloom of Covid — recession, unemployment, and business failures, however you may be interested to know that in fact, a crisis also creates entrepreneurial opportunities. It’s not just global giants that can benefit from disruption, there’s an opportunity for start-ups too!
An annual report from the Global Entrepreneurship Monitor (GEM) in November showed that in 2019, the UK recorded its highest rate of early-stage entrepreneurship since the global annual survey began nearly 20 years ago. Nearly 1 in 10 working age adults were in the early stages of starting or running a business, with female early-stage entrepreneurship hitting an all-time high, according to the report. Younger people, aged 25-34, were the most likely to be starting or running a business.
Some of the biggest brands in the world started during a recession. An economic downturn can create a range of unexpected opportunities for entrepreneurs with an appetite for innovation.
Here are examples of some of the biggest brands that started in a recession
1. Burger King
In the 1950s, after the Korean War laid the US economy low, two brothers in Louisiana recognised the need for fast affordable food. Already running their own burger joint, they maximised on the public appetite for their product by selling franchises of their business.
A real startup success story, FedEx began as a university project for Fred Smith during the 1969-71 depression and turned into a business with almost $70 billion revenue.
This global tech giant started in 1975, in a period of high unemployment, rising inflation and stagnant GDP in America. You might have heard of the founder, billionaire Bill Gates?
4. General Motors
Showing a lot of business-savvy, GM didn’t start during a recession but really used it as a boost. In the early 1900s, the founder used economic uncertainty to buy up smaller struggling manufactures to expand their empire.
Three ways a recession can benefit business
1. Necessity drives innovation
Coronavirus has caused a very specific set of problems that startups are racing to cure.
The current pandemic has seen a flurry of innovation, with small businesses filling gaps left by bigger businesses, including local food deliveries where supermarkets can’t meet demand.
2. Competition may be lower
Many businesses will find themselves with less competition as competitors struggle to restart after the pandemic. For those that are able to innovate or borrow to survive the storm, this can be an advantage when they re-enter the marketplace.
3.Borrowing is accessible
It might seem odd, but economic uncertainty creates a great environment to seek funding. Interest rates are usually lower, meaning loans are more affordable. Many savvy investors use a downturn to get more for their money by investing in cash-strapped startups.
So, with all of this in mind, how do you go about setting up a business?
What you need to do to set up depends on your type of business, where you work and whether you take people on to help.
Register your business
Most businesses register as a sole trader, limited company or partnership.
It’s simpler to set up as a sole trader, but you’re personally responsible for your business’s debts. You also have some accounting responsibilities.
Find out more on gov.uk about being a sole trader and how to register.
If you form a limited company, its finances are separate from your personal finances, but there are more reporting and management responsibilities.
Some people get help from an accountant, but you can set up a company yourself.
A partnership is the simplest way for 2 or more people to run a business together.
You share responsibility for your business’s debts. You also have accounting responsibilities. Find out more about being in a partnership and how to register.
Rules for your type of business
When deciding on your business structure, it may be worthwhile remembering that you may have other responsibilities depending on what your business does.
Check if you need:
There are also rules you must follow if you:
Where you work
Check what your responsibilities are if you:
Taking on people to help
Becoming an employer
You’ll have more responsibilities, including:
paying for their National Insurance - but you can claim an allowance to reduce your bill
providing workplace pensions to eligible staff
Get help and support
The above highlights just a few things that you will need to consider if you are starting up a business, so please get in touch if you would like some guidance or support. Also get in touch if you have already started a business but are unsure if you have everything in place or if you are growing and need to find out more about obligations with regards to PAYE when employing staff. We are here to help and support you and want to see your business thrive.
Disclaimer: The information contained in this article is intended to be a guide and is not intended to be exhaustive. No action should be taken on the basis of information contained herein without obtaining the necessary advice. No responsibility can be accepted for loss or damages occasioned to any person acting or refraining from acting as a result of the material contained herein.