The Startup Report 2023
In 2022, we brought you our first AXA Startup Report - a state-of-the-nation review, delving into the mindset, successes and struggles of the UK's community of self-employed workers and SME-owners.
Introduction
Working for yourself, either as a sole trader or as a business owner, presents unique challenges and risks, as well as opportunities and lifestyle benefits. One year on from our flagship study, with the trials and triumphs of 2022 behind us, we take a look back to see how our small business owners are faring now.
Has rising inflation, the political climate and growing economic pressures caused businesses to falter? Or is our sample more resolved than ever to survive, thrive, and see their million-pound idea made a reality?
As a bonus, throughout this year’s Startup Report, we’ll be gaining insight from careers expert Sarah Berry, who will provide a specialist view on the findings from both a psychological and professional perspective.
Let's get into it.
Secrets of success: hard work, confidence and business acumen
The last year brought a great deal of change, whether it be the war in Ukraine or the ongoing economic recovery as we exit from years of lockdown and COVID-19 restrictions.
While the landscape has shifted, the key to independent success remains the same in the eyes of our self-employed Brits and business owners. As with our study in 2022, hard work (46%), personal motivation (44%) and good organisational skills (42%) were all identified as vital traits needed when striking out on your own.
“Self-belief is integral to independent business success, as it is the driver for decision-making and action. People worry about making mistakes, but even if an action doesn’t turn out how you think, you can always course-correct. Workers coming from a position of a stable and well-paying job may fear risk and financial instability. If you live in complete safety and certainty, it can lead you to feel mentally and emotionally weak, and that can make the leap to starting your own business - and facing the challenges which comes with that - a real struggle.”
Personality traits crucial for success as a small business owner.
| Rank | 2023 | 2022 |
|---|---|---|
| 1. | Hard working | Hard working |
| 2. | Motivated | Motivated |
| 3. | Organised | Organised |
| 4. | Self-belief | Decision maker |
| 5. | Resilient | Confident |
| 6. | Determination | Driven |
| 7. | Confident | Resilient |
| 8. | Driven | Good time management |
| 9. | Good time management | Passionate |
| 10. | Open to change | Open to change |
And for budding entrepreneurs thinking about making their mark for the first time in 2023, business owners have this piece of advice: do your research.
Three in 10 (29%) of those surveyed in our study believe that knowing your field and researching your business before you begin will help you to set off on the right foot, and 26% say a healthy dose of self-belief is needed if success is to follow.
On a more practical note, 21% think good business practices are built on a firm financial plan, and 19% think in-depth knowledge of your customer is vital.
“Starting a business is one of the biggest things someone can do to get them stepping out of their comfort zones. You'll meet new people and learn from new experiences which have helped me build on my confidence and skill set. A lot of the time, it's you putting yourself forward and sharing your vision and ideas with new people and with practice, that helps you own your narrative and become more comfortable taking about your business and goals.”
- 21% think good business practices are built on a firm financial plan
- 19% think in-depth knowledge of your customer is vital
What advice would you be most likely to give someone who is thinking of starting their own business?
It’s good to be boss: taking control of your private and personal life
When asked to consider the reasons why they blazed their own trail to set up their business or enterprise, motivations within our sample were clear. The draw of being your own boss (22%) was the main factor, followed by striving for a better work/life balance (14%) and to earn more money (12%).
And by and large, being your own boss has delivered the expected perks. It is reassuring to see from our sample that the majority (58%) of business owners surveyed believe they have already achieved their primary goal or motivation for setting up shop in the first place.
“People tend to start their own business or make a drastic career decision when they are in a position of pain. We often talk about these decisions as coming from a positive place, like: “I want to be my own boss,” and the benefits that that statement entails. What we should really be doing is confronting this pain. Pains like “I don’t have enough time,” “I’m feeling burned-out” or "I don’t feel good about some of the elements of the corporate world.”
Main goals and motivations for starting a business:
SME stresses: self-made and self-sustaining
It’s no wonder small business owners are feeling the personal strain of seeing their business succeed. This year, in our sample of 500 small business owners and sole traders, 59% supported themselves with personal savings, 10% more than those using the same method last year - so the stakes remain high. This was reinforced with additional help from credit cards (25%), bank loans (25%) and donations from family (20%).
When asked to consider their contingency plan if their business hits choppy water, 43% believe they would have to dig deeper in their own pockets and revisit their personal savings to bail themselves out.
Worryingly, 18% of those surveyed have no contingency or safeguard in place to protect them from financial trouble.
A more optimistic 37% have savings from within the business ready for a rainy day, and 30% have specialist business insurance to provide some additional security should they need to make a claim.
“It is a challenging time for businesses, but on a personal level? It’s ultimately about stepping up. Most people cannot rise to the challenges which come with running your own business. It requires energy and the warrior mindset: to lead the pack and set a course for success.”
Business hurdles: inflation is a major concern for SMEs and sole traders
Despite the myriad challenges faced by an independent businessperson in the UK today, 66% (up from 63% in 2022) feel upbeat about the future prospects of their business. And 77% remain steadfast that starting their own small business was one of the best decisions they ever made.
Which isn’t to say that UK entrepreneurs aren’t realists. Each year brings new challenges and barriers to overcome, and for the 2023/24 tax year, the elephant in the room is inflation. Almost a third (31%) are wary of the effects rising inflation may have on their business, and 24% are factoring in rising fuel and energy costs.
The spectre of inflation casts a long shadow, too, topping our poll of concerns not only for the next 12 months but across the next three years. And 27% of those surveyed believe it has had a significant negative impact on their operations in the past.
Top challenges facing small business owners
| Rank | 2023/24 | 2022/23 |
|---|---|---|
| 1. | Inflation (31%) | Inflation (31%) |
| 2. | Increasing fuel/energy costs (24%) | Increasing fuel costs (29%) |
| 3. | Rising costs of materials (20%) | Weak domestic demand (20%) |
| 4. | Interest rates (15%) | Lasting behaviour changes in consumers resulting from the pandemic (19%) |
| 5. | Weak domestic demand (12%) | Rising costs of non-labour inputs e.g. an increase in the costs incurred to create a product or service (12%) |
| 6. | Rising cost of labour (10%) | Future restrictions caused by COVID-19 or other diseases (12%) |
| 7. | Debt to pay off (8%) | Interest rates (12%) |
| 8. | Brexit (8%) | Access to supplies (11%) |
| 9. | Adapting to modern workplace demands – such as remote working, or a four-day working week (7%) | Impacts from Brexit e.g. increased red tape, reduced access to the EU market, etc (10%) |
| 10. | Domestic tax changes (7%) | High debt hangover due to the impact of the pandemic (9%) |
Opportunity knocks: looking ahead to 2023/24
So far in our study you could be forgiven for thinking that UK-based small businesses are facing an uphill battle to success in the coming year, which is certainly not the view shared by our sample.
As the economy begins to stabilise after more than two years of COVID-19 disruption, 21% are looking forward to reaping the benefits of clients returning to the market. One in five (20%) plan to introduce new products and services to boost the opportunities open to them, and 17% will leverage new and unexplored sales channels to boost their revenue.
A more hardnosed 12% admit they will enjoy an increased market share in the wake of many of their competitors shutting up shop in recent years, and a further 17% believe they will benefit from an increased awareness in the public consciousness of supporting small businesses.
Over the next 12 months, small business owners have security on their mind, whether that be through increasing revenue, introducing new clients to their services or expanding their product base. Unsurprisingly, 46% have set a goal of bringing in more money than ever before in the 2023/24 financial year, and 24% want to maximise their interaction with returning customers. Though 21% have set the more modest goal of simply making it through the year without going under.
“The pandemic really tested the safety and certainty of all our lives, from the biggest enterprise to the smallest sole trader. It levelled the playing field in this regard. Suddenly, money and wages were replaced as the most important ‘currency’ in our lives with matters of health.”
“Covid cracked the shell. It changed society, and it will continue to do so into 2024 and beyond. This shift in priorities has changed what ‘opportunity’ might mean to us, too. In the past the value of an opportunity may have been driven by the bottom line, but post-pandemic business owners are seeing the benefit of business strategies which preserve the new work patterns they first tried in 2022.”
17% of SME owners will leverage new and unexplored sales channels to boost their revenue
Biggest opportunity for small business owners in 2023/24
Taking the plunge: the time it takes to turn dream into reality
Rome wasn’t built in a day, and successful, self-started businesses take time to reach their full potential, too. According to our sample, the average small business takes 2.76 years to get off the ground - from the moment the idea springs to mind to launch day. Though 24% will take the plunge in under a year from their lightbulb moment, 51% wish they had struck while the iron was hot and launched their business sooner than they did.
When asked to consider why they needed the time they took to successfully set up and start their enterprise, 30% of small business owners said they valued the time they took to learn more about the job they were going to do and what would be required of them.
A financially savvy 26% wanted the time to save up enough capital to make a strong and responsible go of it, while 26% needed the time to build up some self-confidence and belief that they really could make their self-employed dreams a reality.
And 15% took a wider view, waiting for a more opportune time within the global economy to take on the additional potential risk of going it alone.
The time and effort? Worth it for 69% of small business owners and self-employed Brits who feel more driven and motivated in their profession since seizing the reins for themselves. And 57% have felt a tangible boost in their self-belief and personal confidence since taking on responsibility for their own working life.
The average small business takes 2.8 years to get off the ground
Big ambitions: the million-pound idea
When we set up our own businesses, many of us like to believe we are bringing a USP to the fore: something special that only we can provide which fulfils a customer need or a gap in the market. For 27% of our SME owners, that X factor is what they believe to be a million-pound idea, ready to be unleashed on the world, but only one in four (25%) of these feel confident they know what they need to do to bring their ambitions to life.
And while their idea might be blue-sky - stepping outside of their industry might be a push too far, with 88% of Brit entrepreneurs harbouring a million-pound idea which is specific to their current sector.
“So many people sit on great ideas because of fear of failure, but how can you fail if you don’t even try? The opportunity to launch your own business does not come along every day so I encourage you not too miss out on such a life-defining moment. Remember, the idea does not have to be perfect straight away, but it must have the basis of an idea that has the potential to be successful. If you’re thinking about entering the AXA Startup Angel competition, take that leap of faith and gamble on your dream. That idea that you just can’t stop thinking about might just change your life.”
Raphael Sofoluke, CEO and Founder of UK Black Business Show and UK Black Business Week and AXA Startup Angel
Our careers expert Sarah Berry has identified the top 10 entrepreneurial traits:
- Sales skills Get over any coyness of shyness straight away so that you allow your business to thrive.
- A sense of purpose and a willingness to take action Successfully entrepreneurs are driven by their sense of purpose to offer their service or product to the world.
- Resilience Every entrepreneur has to build a sense of resilience - it is like building muscle. Failure or set-backs are not an option.
- Adaptability and flexibility Entrepreneurs need to be able to pivot their business strategy and adapt to changes in the market or industry.
- Creativity and innovation Creativity helps entrepreneurs break down the issue, pain or problem and look for the out-of-the-ordinary solutions.
- Risk-taking abiity Entrepreneurs need to be comfortable taking calculated risks and making decision in uncertain or high-pressured situations.
- Strong work ethic with a focus on learning new skills Days off are times to think, learn or rebuild your skills.
- Grit and drive Successful entrepreneurs are able to bounce back from failures and setbacks and continue to work towards their goals.
- Financial acumen Entrepreneurs need to have a good understanding of financial management and be able to manage their business finances effectively.
- Networking and relationship-building skills You need to talk and promote what you do to everyone with love and passion.
2023 continues to present challenges for SMEs with inflation a growing concern. However, it’s encouraging to see that two-thirds of those we surveyed feel upbeat about their business prospects and this has increased by almost 5% from last year.
SMEs prove year on year how tenacious and determined they can be, so it comes as no surprise that being hardworking and motivated are the top skills needed for success. With self-belief moving closer to the top of required skills, it’s essential that we rally around business owners and support their growth and development.
With this in mind, I'm proud to see the AXA Startup Angel Competition in its third year as we search for another six deserving businesses to support with invaluable mentorship from some of Britain's best entrepreneurs as well as 12 months of business insurance.
AXA Startup Angel Competition 2023
AXA UK launched the AXA Startup Angel competition in 2021 to help give aspiring entrepreneurs the opportunity to turn their dreams into reality.
Now in its third year, we’re giving six businesses the chance to win; including two top prizes of £25,000, invaluable mentorship from some of Britain's best entrepreneurs as well as 12 months of business insurance.
Find out more about last year's winners: Team Repair and Muihood
The four business founders tasked with judging the competition and providing mentorship will be:
- Henry Firth Co-founder of vegan recipe brand BOSH!
- Ian Theasby Co-founder of vegan recipe brand BOSH!
- Raphael Sofoluke CEO and Founder of UK Black Business Show and UK Black Business Week
- Sharmadean Reid MBE Founder and CEO of WAH Nails and The Stack World
