The appetite for self-sufficiency among the UK’s youth is on the rise, according to data collected by a group of finance directors, entrepreneurs and former business owners.
It shows that increasing numbers of 18 to 24-year-olds want to start their own business, rising from 23% in 2021 to 32% in 2022, according to a poll of more than 4,000 young people.
That age group has been particularly disrupted by the pandemic. The National Audit Office figures showed unemployment rising in 2020 from 3.9% to 5.1% and, as of January 2022, resting at 4.1%. But unemployment for 16 to 24-year-olds spiked from 11.3% to 14.4% in 2020, and sat at around 11.3% at the end of 2021.
Perhaps this is unsurprising as many of the businesses in retail and hospitality that employ young workers have closed due to lockdowns and the muted economic conditions afterwards.
Mushroombiz, the SME incubator behind the poll data, points to improving macro-economic factors for the growth in interest in starting a business. UK GDP was estimated to have grown by 0.9% in November 2021, this is 0.7% larger than it was before March 2020 and the first lockdown, it said.
But the reason why entrepreneurialism is growing among young people may also be found online. As real-world opportunities dried up during the pandemic restrictions, many looked to the examples set by influencers through aspirational content on social media.
The influence of the burgeoning digital business world on Gen Z through the ‘hustle’ culture online makes starting a business seem easy.
Crypto investments, get-rich-quick schemes and self-help guides make riches seem tangibly close without much explanation; some use that as a hook to sell training or guides. But the reality is different.
“I think there is a bit of a swing towards entrepreneurship because of TV programmes like Dragons Den, The Apprentice and social media influences too,” says Nick Travis, Partner and Head of Entrepreneurs at Tilney Smith & Williamson. “There is a simplification of what it takes to be successful on social media. In reality, starting a business is, most of the time, a completely brutal, all-consuming battle.”
This battle is easier to fight with the right advice when you get started, whether this is from government, charitable initiatives, private or public schemes.
As an example, young entrepreneurs can find support from local enterprise partnership schemes (LEPS), as well as local authorities and colleges, which often run start-up accelerators.
Banks also host incubators to encourage young businesses. Barclays runs a scheme for entrepreneurs called Eagle Labs, while the British Business Bank runs the Start-up Loans programme.
Achievement is recognised through platforms such as Innovate UK and the Prince’s Trust, which together run the Young Innovators Awards.
There is also advice online, such as the Business Finance Guide, co-authored by ICAEW Corporate Finance Faculty Head David Petrie, in association with the British Business Bank.
As well as support and advice, of course the business basics are important, says Shaun Beaney, Manager, Corporate Finance Faculty at ICAEW, who works extensively with start-ups including Watford Young Entrepreneurs, a cooperation between Watford Borough Council and the University of Hertfordshire.
“Young people often need pointers on business planning and putting together their first financial plan,” says Beaney. “They need to be clear that there is real demand – is there a real market of paying customers? And understanding margins between cost and revenue is crucial, as is monitoring their cash flow and growth, and paying the right amount of tax.”
Budding entrepreneurs who meet certain requirements can use the Seed Enterprise Investment Scheme, which allows better access to funding, as it affords investors substantial tax breaks.
On the accountancy side, some of the work for start-ups is going to be at quite a basic level, so might be conducted on a pro-bono basis.
Beaney suggests schemes such as the East London Inclusive Enterprise Zone, which he also works with, as good starting points for entrepreneurs with diverse backgrounds.
In the very early days, a start-up may only need a bookkeeper or bookkeeping app to make sure everything is in order. But as start-ups grow and become more sophisticated, their needs for more developed services in tax and financial planning grow too.
This includes advice on the right insurance, such as liability insurance as they take on employees – an example of where advice from chartered accountants can come in.
“As things grow in size and complexity, the business will need to graduate to a more sophisticated accountant who is used to helping fast growth businesses though their growing pains,” says Travis.
“This type of advice tends to be much more strategic and forward-looking than just retrospectively booking the numbers. Start-ups often make the move later than perhaps they should, as they are very focused on price. Getting the cheapest advice can often end up being very costly later on when mistakes need to be unpicked,” he adds.
Reaching the point when start-ups start looking for grants and crowdfunding also becomes a time where they begin looking for accounting services.
Some firms and small practitioners have services for start-ups, but it’s more likely that firms target high growth companies.
“I would suggest to an entrepreneur that they should start a relationship with a mid-size firm early,” says Travis. “It is likely they will be willing to give a little general guidance. For most growing clients, the move to a mid tier will be gradual, often starting with something that their current adviser seems out of their depth with, such as R&D tax claims or share schemes.”
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