Becoming an entrepreneur: What does it actually take?
With over half of businesses becoming profitable after the first year, and two-fifths of entrepreneurs saying being their own boss is enjoyable, making your business plan a reality is an attractive opportunity. But what are the risks, doubts, and monetary sacrifices that come with beginning your entrepreneur adventure?
SumUp surveyed 540 business owners around the UK, and from various European countries, to get a better understanding of what it takes to reach entrepreneurial success. We also shed light on the financial challenges, issues, and benefits that come with setting up and running a business to help budding entrepreneurs.
First, let's make sure we're on the same page about what an entrepreneur is.
What is an entrepreneur?
Anyone can be an entrepreneur.
It doesn't matter where you come from, how old you are, or what you look like. More people are doing their own thing than ever before – and the number of startups in the UK keeps growing at a record pace year after year.
Being an entrepreneur is simply having an idea and acting on it. So whether creating goggles for dogs or serving coffee from a bike, there are all kinds of opportunities out there for you.
Types of entrepreneurship
There are several different types of entrepreneurship, distinguished by who founded the business, how big the business is, and why the business was founded. Some of the most common types of entrepreneurship are:
Small-business entrepreneurship. A small business is defined as one with under 250 employees
Social entrepreneurship, which deals with solving social problems
Young entrepreneurship, which is the term for a business started by someone under 25
Now that we know a little more about what entrepreneurship is, let's see what we've learned from our survey.
Over half of new businesses become profitable in the first year
Our survey revealed that over half of all entrepreneurs (54%) had a profitable business between year one and two. But the companies that become profitable the fastest are those within the travel and transport sector – 23% of those surveyed say their business was profitable within the first year, and 100% say it was profitable within three. This is interesting considering travel has been limited over the past few years due to the pandemic. Whilst we were stuck at home, however, there was a rise in online shopping causing an influx in transportation companies to deliver goods. The least profitable companies are those in IT and telecoms, where just 2% made a profit after the first year. This could be due to the considerable outgoings they have at start-up as they need to buy resources and equipment.
To understand the potential financial challenges of creating a profitable business, we also asked entrepreneurs how much they invested into their company at start-up. Whilst the majority of respondents (26%) invested between £1,000-£9,999, there were differences depending on the business sector. Entrepreneurs with retail and catering businesses invest an average of £12,115 at start-up, with the majority, 34%, investing between £10,000-£24,999. This is a stark comparison to architecture and building businesses who invest the most money of all entrepreneurs- an average of £81,000 is pumped into these industries' start-ups, with 20% even investing up to £499,999.
The biggest challenge for entrepreneurs is having a lack of time to make their business succeed
Running a business also comes with its highs and lows and to shed light on these we asked respondents to highlight the main challenges they have faced since being an entrepreneur.
The most prevalent issue for entrepreneurs is time management, over one-fifth of business owners highlighted this as a challenge. Through using our services, such as SumUp Invoices, Payment Links, and our SumUp Business Account we can alleviate the stress of fulfilling several tasks and make sure all business information is in one, easily accessible place. This will free up time that entrepreneurs can then utilise elsewhere in running their business.
The following table shows the main challenges that entrepreneurs faced when setting up their business:
The third most was self-doubt which becomes a more prominent issue as the age of the entrepreneur increases. Only 13% of those aged 16-24 highlighted this as a challenge compared to 27% of entrepreneurs aged 55+. This suggests that entrepreneurs are ageing with their businesses and are taking more risks which contributes to a heightened sense of pressure. By setting realistic goals, entrepreneurs will feel more capable of being able to fulfil and meet targets.
We also wanted to reveal whether business size affects the challenges that entrepreneurs are faced with, and found that Mental health concerns are more prevalent among smaller companies. Nearly a fifth (18%) of businesses with 1-9 employees highlighted this as a challenge, but this decreased to just 9% for those with 250-500 employees. This shows that the smaller the business, the more likely the employee is to suffer from mental health issues. Business owners can invest in work therapists and life coaches to minimise this and better the mental health of their employees.
The majority of issues that entrepreneurs are faced with are associated with the actual runnings of a business and can be effectively minimised through the use of digital tools and services. But how many entrepreneurs actually make use of these?
Not all SMEs use software to help run their businesses
Our survey found that whilst the majority of entrepreneurs (91%) make use of technology within their business, there is still a proportion of business owners who do not utilise these tools. With nearly one-tenth (9%) still not making use of technology, we wanted to gain a better understanding of why. Primarily, new businesses rely upon technology less- 24% of new businesses don’t make use of technology but by the time they are four years old this number decreases to just 3%. This shows as businesses grow and entrepreneurs become more adept at running a company they understand the importance of digital tools.
We then wanted to reveal what business aspects technology is used most for to reveal what entrepreneurs are utilising this most for. The most common use for digital tools and solutions was for company sales – over a quarter of respondents (26%) make use of technology for this. Our point of sale service can also elevate any pressures of this business aspect as entrepreneurs can process orders, keep track of payments and create sales reports.
What are the most enjoyable parts of being an entrepreneur?
Whilst running a business may have its setbacks, there are many benefits that make it a worthwhile career move. Through our survey we wanted to gain a better understanding of why people became an entrepreneur, and what they believed were the most enjoyable parts of running their own company.
1. Being your own boss
Over two-fifths (42%) of business owners say being their own boss is the best part of running a company. From choosing your own working hours to location of work, being in charge of yourself allows you to choose and adapt to your own, unique working style.
2. Seeing your business grow
The second most enjoyable aspect of being an entrepreneur, that 31% respondents highlighted, was seeing their business grow. Older entrepreneurs place more value on this: 47% of those aged 55+ highlighted this as the most enjoyable part compared to just 28% of 16-24 year old entrepreneurs.
3. Freedom of choosing working hours
The third most enjoyable aspect of running a business is the freedom to choose your own working hours. With those aged 45-54 placing the most value on this, 44% said this was the most enjoyable part of being an entrepreneur, it is clear that business owners place more value on a work-life balance as they get older.
Over one-fifth (22%) of entrepreneurs believe that being able to be creative, and setting their own boundaries and constraints, is the most enjoyable aspect. This suggests that jobs should allow their employees to be more creative and have freedom with the choices they make in relation to their work.
5. Potential financial freedom
One-fifth (20%) of business owners find the financial freedom of running a business the most attractive aspect of being an entrepreneur. 18% of those who have been running their business for less than a year highlight this as enjoyable and this increases to 22% for those who have been running a business for one to three years. This suggests that it takes a while for entrepreneurs to see their businesses potential but when they do it is an attractive aspect of being an entrepreneur.
Whilst there may be some downfalls to running a business the main challenges that entrepreneurs face are business related. With technology continuously improving, and 81% of business owners making use of the available digital tools already, it is clear that running a business will become even more streamlined in years to come. With the freedom and benefits that entrepreneurs have highlighted, with 42% highlighting being their own boss is the best aspect it is clear that being a business owner has huge benefits.
SumUp commissioned a survey of 540 entrepreneurs in April 2022.