Fewer than 1 in 10 small businesses set up because they spot market gap

Only 3pc of SMEs go into business because they want to be 'next big thing', says business lender Iwoca

Fewer than one in 10 small businesses set up shop because they actually see a gap in the market.

And only 3pc of SMEs go into business to “create the next big thing”, according to new research from business lender Iwoca.

The findings of the Iwoca survey are bound to dismay venture capitalists, who look for start-ups who have identified a gap in the market and present themselves as the solution.

Working for oneself is the number one reason SMEs give for having started a business (69pc), with “so that I can love what I do” being the second most powerful motivator (31pc). Spending more time with family is in third place (23pc). (Given the sheer sweat and always-on nature of running a small business, the idea that one gets to spend more time with loved ones will surely raise eyebrows.)

Worryingly, 6pc of respondents say they only launched their SME because “they weren’t sure what else they could do” with 4pc of respondents saying they started a business because they “got fired”. One business owner’s gnomic reply was, “It’s better to be the head of a chicken than the tail of an ox.”

Business obstacles

Lack of finance is seen as the biggest obstacle to running a business (21pc), followed by late payments (19pc) and “red tape” (18pc). Brexit only concerns 15pc of small business owners.

The speed with which finance can be raised is important to business owners (58pc).

And when it comes to late payments, almost 40pc of SME owners say they hate the Stess which comes with not being paid on time, with one in five saying they’ve been “ghosted” by debtors who ignore them when they press for payment.

Iwoca interviewed 1,000 SME owners in May for its small business survey.

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Further reading

The seven-point checklist for setting up a business

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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