UK start-ups have a lower appetite for fund raising and are paying themselves less

Small businesses in the UK have a lower appetite to raise capital than they did in 2023 and are paying themselves less, new Enterprise Nation analysis has found.

The Small Business Barometer, a quarterly survey amongst start-ups, early-stage and small businesses by Enterprise Nation, found 54% said they were looking for funding in the next 12 months, nine percentage points lower than in 2023.

The analysis also found that of those that do want to take on funding, a higher percentage were looking for less than £10,000 (35%) compared to 19% last year.

They are also paying themselves less, with 47% saying they paid themselves under £10,000, up by a fifth from 27%.

At the same time around a fifth (21%) said they were often paid late with more than a third (36%) of those operating in business services and food and drink seeing late payments impact on their cashflow.

But there was a golden nugget, the research found a significant increase in the number of small firms that reported they had found small business support they were looking for to help them build their business. That rose from 37% in 2023 to 53% at the beginning of the year.

Emma Jones CBE, founder of Enterprise Nation, said:

"The economic backdrop and increase in operating costs has meant business owners have had to downgrade their growth ambitions and we can see this trend through a progressively decreasing appetite to invest. That has inevitably meant they have had to personally take a hit by paying themselves less.

"On top of that, many business founders are also still reporting they are being paid late, which means they cannot use cashflow to invest in innovation and their own ambition.

"Entrepreneurs are ever optimistic and we detect that they are not resting on their laurels as the ups and downs of the economy wash over them. They are seeking out support which is wonderful to see.

"As the economy recovers, we expect to see these figures improve and for growth to take hold."

The research found one in four (26%) said they were exporting their services or products, with one in ten of those saying they hoped to increase exports. It also highlighted a gender split with a third of male-founded firms (32%) saying they were exporting compared to 22% of female-founded companies.

One in five (21%) firms in Yorkshire and the Humber said they export, the highest proportion in the UK.

Encouragingly, female-founded firms have consistently prioritised taking advice, with almost a third (28%) working with an adviser, compared to 21% of male-led companies and they are also more likely to take a mentor (21% v 17% male-led firms). The same is true for younger founders, with a third (31%) of the 18 to 24 age group working with a mentor.

Confidence is still holding steady, according to the analysis, with 33% saying they were likely to expand in the next 12 months, roughly in line with the last quarter (32%). Regionally, 44% of firms in the North East said they were 'quite likely' to expand, the highest in the UK. London saw the most optimism with 29% saying they were 'very likely' to expand.

Technology was the sector expecting to see the most growth (44%) with general retail and events businesses also feeling confident about expansion (both 38%).

The power of mentoring

Rachel Rowtree, the commercial director of Hampshire-based chemical-free feminine intimacy brand YES, was mentored by Dr Svetla Stoyanova-Bozhkova, a union which saw the women's health company grow by 30%, adding £1.1m to the bottom line in 2023.

Svetla, who is deputy head of department in people and organisations at Bournemouth University, worked with Rachel shortly after Rachel's diagnosis for ADHD, as a volunteer for the government-backed Help to Grow: Management course.

Rachel said:

"Svetla's coaching offered me the perfect mix of mentoring and advice, whilst allowing me to also develop my own solutions.

"Her style suited me perfectly and the combination of guidance and self-development from Svetla, allowed me to flourish both personally and professionally. This development was reflected in our company results."

Svetla's own professional experience spans a variety of industries including manufacturing, hospitality, transport, construction, real estate, medical services and alternative energy sources, where she set up and managed departments including PR and marketing and research and development.

Svetla said:

"Rachel sets an inspiring example as a neurodiverse woman and a commercial director of a middle-size business, who successfully completed the Help to Grow: Management course and led the business team to a remarkable 30% growth in 2023, while dealing with a new diagnosis of ADHD and the demands of a busy professional and family life.

"Rachel defied the limitations of her condition and embraced the opportunities provided by the mentoring programme to achieve personal growth, a new-found confidence as a senior level manager and realise quantifiable change in business terms. A true example of the contribution of Help to Grow to diversity and inclusivity."

Read the full Small Business Barometer report