According to data from Experian, these ‘debut directors’ start with less investment than ever before and an increasing proportion come from backgrounds with lower-than-average levels of affluence.
More than half a million businesses were created in the UK last year (515,000 in 2013, up 8.9 per cent from 473,000 in 2012), with the proportion of first-time directors rising by 12.6 per cent (304,000 in 2013 compared to 270,000 in 2012).
A debut director is an individual listed as a company director for the first time. First-time directors in 2013 have less start-up capital and come from a lower affluence band when comparing these individuals’ incomes, property values and net worth to national averages.
Business survival rates also on the up year on year, from 76 per cent in 2009, to 87 per cent in 2011.
The survival rate measures businesses still trading two years after start-up, observing companies which have survived up to the end of 2013. Overall, those less affluent debut directors have a slightly lower chance of survival (84 per cent compared to 87 per cent survival rate in 2011), but a savvy approach to business and credit management can increase those chances significantly.
Max Firth, managing director for Experian Business Information Services, UK&I says, ‘These figures suggest a shift in how we should view the average UK entrepreneur. It’s not all high-tech start-ups and Dragons’ Den-style big ideas.
‘An increasing proportion of new business directors are making the most of the lower start-up entry levels; grabbing a mobile phone, a laptop and a flexible workplace, and creating their own jobs and their own opportunities.’
Firth adds that while this increasing population of debut directors should be celebrated, there is much they can do to improve their chances of success.
‘Some may still lack the experience, capital and contacts needed to survive those first few tricky years. So it’s crucial for young entrepreneurs to tap into business support networks for advice and they shouldn’t underestimate the value in partnering with a more experienced director if they can.’
Just as crucially, they need be aware of how others may see their business and the impact this could have on their access to essential services and potential funding opportunities.
Experian offers the following advice for debut directors:
- You don’t have to go it alone: It may be advisable to try to find a partnering director, especially if you are able to partner with someone who has previously experienced start-up success to act as a mentor.
- Businesses started by two people or more have a greater chance of survival.
- Know your sector: There are many successful firms even in vulnerable sectors, just as there are many companies in growing sectors that do not perform well. The key is to ensure you have a good understanding of the risks and challenges of the target sector.
- Know your area: Make sure there is local demand for the service or product if targeting a specific region.
- Investigate all available finance options: Don’t just rely on overdrafts, bank loans or personal sources of cash. Investigate alternative sources of finance, such as crowdfunding, angel investments, business cash advances and government grants.
Further reading on setting up a company
