Pandemic Startup Boom: Tide members tell us why they started their business in 2021
Starting your business in the middle of a pandemic might seem like a weird choice, but according to Companies House, there were 21.8% more businesses incorporated in the UK in the year to March 2021 compared to the previous year.
What is driving this entrepreneurial boom? Are these companies capitalising on pandemic opportunities? Or could the surge in new startups be connected to the roaring economy (rising at its fastest rate in 80 years, according to financial forecaster the EY Item Club)?
We surveyed over 1,000 Tide members to understand their motivations for starting a business in 2021, and to discover whether the pandemic played a part in their decision.
The results paint a promising picture of entrepreneurial daring and economic optimism. We may be living through challenging times, but even now there are fertile markets and opportunities to grow.
- 26% of respondents felt that the pandemic created an opportunity for their business
- 55% rely on their business as their primary source of income
- 41% are fully confident of making a profit in their first year of trading
In this article:
- Motivations for starting a business
- Why did you start a business now?
- Has Covid helped or hindered your business plans?
- What are your ambitions for your new business?
- How confident are you of making a profit in your first year?
Who completed our survey?
Women represent 30% of our respondents. This corresponds roughly to the national statistics on company founders, something we analysed in our research on gender equality, entrepreneurship and equal pay.
In terms of ethnicities, our respondents are broadly consistent with the makeup of the UK population, with encouraging signs that some ethnic minorities are over-represented.
Several ethnic groups, including Asian/Asian British and Black / African / Caribbean / Black British are more likely to start a business than their White British counterparts, at least in percentage terms. This shift may be partly explained by the fact that the available UK ethnicity data is based on a decade-old census.
According to the 2011 census, 86% of the population was white, compared to 69% of our respondents. Asian ethnic groups represent 7.5% of the population, compared to 12.2% of our respondents. Black ethnic groups represent 3.3% of the population, compared to 8.7% of our respondents.
These findings pose interesting questions about changing attitudes to entrepreneurialism and an increasing propensity for people from a wide range of ethnicities to want to work for themselves, as well as the commercial and societal factors that may discourage some groups from engaging in the traditional workforce.
Sectors covered by our survey are brilliantly broad. It’s interesting to see just how little consistency there is among the UK’s entrepreneurs. While we see big numbers in retail (e-commerce) (13%) and construction (11%) these are the only two sectors to break into double figures. The remaining 69% are spread thinly across 32 other sectors. A big chunk of our respondents mysteriously claimed the ‘Other’ option – which likely represents companies that straddle multiple sectors.
Experience levels vary. Although 66% are starting their first business, 34% have prior experience in running a business.
Motivations for starting a business
What drives an entrepreneur to break away from the security of employment and strike out on their own?
For most of our respondents (45%) they were simply following their heart and responding to a desire to work for themselves, with 32% saying that they were fulfilling a life-long ambition.
Work-life balance was a driver for 29% of our respondents, while 24% were acting to capitalise on a specific opportunity. Some respondents shared specific details, mentioning things like planning for their future and wanting to create security for their children.
Why did you start a business now?
As we noted earlier, the pandemic has been a boom-time for new startups. And 48% of our surveyed starter-uppers reported that now felt like the right time.
More than a quarter (28%) were motivated by a desire to stop working for other people, while 39% were influenced by the pandemic, with 26% feeling that the pandemic actually created an opportunity for their business. Another popular response, which we picked up in the survey’s text comments, was a need to have a limited company to land a particular client, contract or job.
Our findings offer an optimistic counterpoint to the less encouraging news we’ve all faced over the past 18 months.
Has Covid helped or hindered your business plans?
However, between lockdowns, home-schooling, washing our hands until they bleed, and the generalised terror of living in a disaster movie, one might imagine that Covid is only going to stand in the way of your business plans.
And you’d be kind-of correct. Even though the pandemic created an opportunity for some, 37% of those surveyed believed that Covid has created obstacles, while a significant minority (32%) did not feel that Covid has had any impact on their fortunes. Surprisingly, 20% felt that the pandemic actually made things easier. The fact that retail (e-commerce) has been such a popular sector for businesses to be started in suggests many people spotted an opportunity in people being more home-based. And perhaps the pandemic has given some people time to reflect, and other people have been forced to improvise a new career as one disappears.
What are your ambitions for your new business?
Do these pandemic-era businesses represent short-term gigs or long-term plans?
For most of our respondents (55%) their new business is their full-time occupation. These founders are resting their futures in their ventures. Nearly a quarter (25%) see the new business as a side-hustle which they hope will evolve into something substantial enough to sustain them.
Just 17% see the business as a long-term side-hustle that they will operate alongside their primary income stream.
This is another encouraging sign that the pandemic has done little to dent the nation’s optimism in entrepreneurialism.
How confident are you of making a profit in your first year?
For many business founders, operating at a loss is not unusual in the first few months. After all, you’re likely to be heavy on costs and light on customers.
Despite these factors, our respondents are feeling optimistic about making a profit in their first year of trading, with 41% of those surveyed stating that they are completely confident they will make a profit. The average confidence score is 7.9 (out of 10) and only 18% of respondents rated their confidence at 5 or below.
What do these findings tell us about doing business in 2021?
For most people, identifying the right time to start a business is impossible, there is never a right time. However, many of the best entrepreneurs seize opportunities as soon as they appear, the timing will never be perfect, but jumping in with both feet and giving it ago is often the best way to go.
This year there will have been people who use their furlough time to plan their escape from the rat race or to draw their dreams into the daylight. Wherever you sit on this spectrum, we hope you find this survey encouraging. There are thousands of people starting companies right now, and the economic conditions look promising. We look forward to running the survey again in another 3 months so we can compare our findings.
Ready to kick-start your big idea? Tide can help you form a company and create your business bank account.