Overcoming your fears when starting a new business
Table of contents:
How to overcome the fear of financial risk when starting your own business
Have you ever dreamed of starting your own business? Maybe you’ve had a great idea that you’ve been itching to pursue, but the fear of failure and financial instability has held you back. You’re not alone – many aspiring entrepreneurs face the same barriers and struggle to take the leap into entrepreneurship.
But what if you could learn from those who have successfully overcome these challenges? In this article, we’ll delve into the fear of failure and financial instability that holds many potential entrepreneurs back and explore ways to overcome these barriers. We’ll also hear from real-life entrepreneurs who have taken the leap, faced the fear head-on, and come out on top. With their stories and advice, you’ll gain the inspiration and insights you need to turn your entrepreneurial dreams into a reality.
The price of success: addressing financial worries when starting a business
Starting a business can be a risky endeavour, and new research from Hitachi Capital Business Finance sheds light on some of the key financial fears that hold back aspiring entrepreneurs in the UK. According to the study, the top concerns for would-be entrepreneurs are:
- Lack of access to finance or funding
- Fear of not being able to make enough money to support themselves and their families
- Concerns about personal debt and financial liabilities
- The potential for unexpected costs and expenses
- The fear of failure and the impact it could have on personal finances
One major hurdle for new business owners is figuring out how to cover start-up costs. Some may consider putting their personal savings on the line or taking out a bank loan. Others may turn to friends or family for support. However, these options can come with significant risks, such as losing personal assets or straining relationships.
Even for those looking to go freelance as a micro-entrepreneur, the fear of financial instability can still be a concern. What if freelance income turns out to be much lower than the current salary?
Despite the potential risks, many successful entrepreneurs have overcome these fears and turned their business ideas into successful ventures. One key trait that drives their success is problem-solving. They have found ways to overcome financial hurdles and make their businesses profitable.
So, what can aspiring entrepreneurs do to overcome their financial fears and make their business dreams a reality? Some potential remedies include developing a solid business plan, conducting market research, seeking out mentorship or guidance from experienced entrepreneurs, and exploring alternative funding options such as grants or crowdfunding.
While the fear of financial insecurity is a valid concern, it shouldn't stop aspiring entrepreneurs from pursuing their business ideas. With careful planning and determination, it is possible to turn those fears into a successful business venture:
- Understand the risks involved
The first step to overcoming the fear of financial risk is to understand the risks involved. Starting a business is not a guaranteed success, and there is always a chance that you might fail. However, failure is not always a bad thing. Many successful entrepreneurs have failed multiple times before achieving success. You can learn a lot from your failures and use that knowledge to improve your next business venture. Additionally, you can minimise your financial risks by conducting thorough research and developing a solid business plan.
Check out the story of Jeff Bezos, the founder of Amazon. In the early days of Amazon, Bezos invested his entire life savings, and he convinced his parents to invest their retirement savings as well. This was a huge risk, but it paid off in the end. Amazon is now one of the most successful companies in the world.
- How preparation and research can help overcome fear in business
Research and data are essential tools in the fight against fear when starting a business. By gathering and analysing facts and hard information, you can better understand the market you are entering, the competition, and the potential for success. This knowledge can help you prepare for the challenges you may face and develop a solid business plan.
One way to gather this information is by activating your network. Reach out to friends, family, use LinkedIn, connect with professional contacts who may have experience in your industry or in starting a business. They can offer advice and insights into what worked for them and what pitfalls to avoid.
Another way to gather information is by researching existing players in your intended market. Analyze their business models, revenue streams, and customer bases to better understand the landscape you are entering. This information can also help you assess the costs associated with starting and running your business.
Finally, having a well-developed proof of concept can make it easier to secure outside investment. Investors are more likely to put their money behind a business that has a clear plan and a strong foundation of research and data to support it.
One real-life example of how preparation and research can help overcome fear in business is the story of Sara Blakely, the founder of Spanx.
Before launching Spanx, Blakely spent a significant amount of time researching the hosiery industry and the problems that women faced when wearing traditional pantyhose. She discovered that many women disliked wearing pantyhose because they were uncomfortable, unflattering, and prone to ripping or sagging.
Based on her research, Blakely developed a prototype of her own shapewear product that she believed would address these issues. She also spent time preparing for the launch of her business by saving money, attending business classes, and creating a detailed business plan.
Her hard work paid off, and Spanx became a billion-dollar company, demonstrating how preparation and research can help entrepreneurs overcome fear in business.
- Take calculated risks
Taking risks is a necessary part of entrepreneurship, but you don't have to take blind risks. It's important to take calculated risks by conducting thorough research and analysing the potential outcomes of your decisions as we mentioned in the previous point. You can also test your business idea before investing too much money into it. This can be done by creating a minimum viable product (MVP) or conducting a small-scale pilot test.
Let’s take the example of Airbnb. When the company was first launched, the founders rented out their own apartment to make extra money. They then realised that there was a huge demand for short-term rentals, and they decided to turn their idea into a business. The founders conducted thorough research, created an MVP, and tested their idea on a small scale before investing a lot of money into the business. This calculated risk paid off, and Airbnb is now valued at over $100 billion.
- Learn to manage your finances
One of the biggest financial risks of starting a business is not managing your finances properly. It's important to create a budget and stick to it, track your expenses, and keep your personal and business finances separate. You should also have a plan in place for managing cash flow and securing funding if needed.
- Maximising your skills: the benefits and importance of outsourcing in entrepreneurship
Starting a business can be a lonely and stressful journey and having a strong support system can make all the difference. Surround yourself with people who believe in your vision and can provide you with emotional and financial support. This can include family, friends, mentors, and investors.
Outsourcing can be a valuable tool for entrepreneurs who recognise their limitations and are willing to invest in outside expertise. For example, if you're not skilled in website design, it may be wise to hire a professional web developer to create an effective online presence for your business. Similarly, if you lack marketing knowledge, it may be worth outsourcing to a marketing agency to help you reach your target audience.
Consider starting your business as a side hustle
If quitting your day job to pursue your entrepreneurial dreams feels like too big of a leap, consider starting your business as a side hustle.
By working on your business in your free time, you can gradually test the waters and learn the ropes without the financial pressure of relying solely on your business income. Additionally, maintaining a steady stream of income from your day job can provide a safety net to fall back on if your business takes longer than expected to become profitable.
Working a side hustle also allows you to develop important time-management skills and learn about areas of running a business that may be outside of your expertise, such as accounting or marketing. So, don't give up the day job just yet - consider starting your entrepreneurial journey as a side hustle.
RECOMMENDATION: Developing a business alongside a full-time job is legal in the UK. However, there may be restrictions or legal requirements that need to be followed depending on the type of business and industry involved. It is always recommended to seek legal and financial advice when starting a new business or side hustle.
How to raise funds for your business
- Self-Funding: If you have the resources, financing the entire project yourself can be a great option as it allows you the freedom to run your business as you see fit. Even if you don’t want to risk all your savings, injecting part of your available personal funds into the project may still be a good idea as it shows potential investors that you are putting your neck on the line and that they are not going to carry all the risk on their shoulders.
- State and European Aid: There are many financial aid programs and initiatives in most countries designed to support entrepreneurs, and these programs can be on a national, regional, or local level. You need to research them to find out what’s available, and it may require some digging, but you may be surprised at what you can find. The European Commission also provides initiatives designed to improve SMEs’ access to finance and markets.
In the case of the UK, there is an abundance of financial aid programs and initiatives in the UK on a national, regional, and local level. Some examples of these schemes include the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Regional Growth Fund (RGF). You can find more information on these schemes on the UK government's website.
- Local Incubators and Accelerators: Not only do incubators and accelerators provide help with finding resources, they are also helpful in building relationships with mentors, investors and other local startups. There are many incubators and accelerators in the UK that provide support to start-ups. Some of the biggest players include Techstars, Seedcamp, and Entrepreneur First. You can find a more comprehensive list of UK-based incubators and accelerators on the UK Business Angels Association website.
- Bank Loans and Online Solutions: UK start-ups can also explore traditional bank loans to finance their business. It's important to shop around for the best interest rates and terms. Online lenders like Funding Circle and iwoca also offer fast and flexible financing options.
- Loans from Family and Friends: Another option is to borrow money from family and friends. These business relationships can have an extra level of built-in trust and mutual understanding. However, it’s advisable to treat investment from someone you know just as you would with someone you don’t, with a contract that map out the agreement.
- Crowdfunding: This is an inexpensive way to raise capital and have the added benefit of creating a community of potential customers around your product or service. Crowdfunding can allow you to create a buzz and spread the word from the very start of your project. You can check out platforms like Crowdcube and Seedrs to start your research on crowdfunding in the UK.
- Find a Partner: You can share the financial risk by combining your strengths with those of a partner company in the same industry. The mutual agreement can be relatively flexible as you don’t need to create a new business entity. Entering into a joint venture allows two (or more) companies to pool their resources and compensate for each other’s weaknesses.
- Angel Investors and Venture Capitalists: Angel investors are a more likely source of funding for companies in their infancy. As well as funding, they are a valuable source of mentorship, business experience and networking opportunities. The UK Business Angels Association is a good place to start your search for Angel investors in the UK. On the other hand, venture capitalists tend to invest in more established businesses.
However, before you explore any of the above avenues for funding, there is one thing that you will certainly need: a solid business plan.
Raising start-up funds can be a challenging process, but with the right research, planning and perseverance, you can find the funding you need to get your business off the ground.
Creating a solid business plan
Creating a solid business plan is essential when starting a new business venture. It is the roadmap that outlines the goals, strategies, and financial projections for your company. Here are some key points to keep in mind while building your business plan:
- Define your business idea clearly, including your product or service and target market.
- Conduct market research to understand your competition, target customers, and industry trends.
- Develop a marketing strategy that details how you will promote and sell your product or service.
- Determine the financial requirements for starting and running your business, including startup costs, operating expenses, and revenue projections.
- Create a comprehensive financial plan that includes projected income statements, balance sheets, and cash flow statements.
- Present a clear and concise executive summary that summarizes the key points of your business plan.
- There are many resources available online to help you write a business plan tailored to your specific needs. For example, the UK government provides a step-by-step guide to creating a business plan, including templates and examples. You can also seek guidance from business advisors or mentors, attend workshops, and take online courses to improve your business planning skills.
Remember, a well-crafted business plan is not only essential for securing funding but also helps you stay focused on your goals and make informed decisions about the future of your company. Get our template here.
Turning fear into motivation for start-up success
Overcoming fear is an important part of entrepreneurship. Fear of the unknown is a natural response, but it can be overcome with research, planning, and hard work. In fact, fear can be a great motivator for entrepreneurs if harnessed properly.
It's essential to believe in your idea and have data to support it. If you do, there are many sources of funding available for you to explore.