The Myths Surrounding Starting and Running a Business research released today highlights some of the myths that discourage many people from taking the plunge and starting up their own business.

The research reveals:

Myth No. 1: Around the same number of entrepreneurs buy an existing business as start from scratch. 

Fact: some three-quarters of firms are started from scratch, far higher than survey respondents believed the figure to be. Respondents feel that it is harder to start a new business than is actually the case.

Myth No. 2: It takes years to start a business from scratch.

Fact: Most businesses are established within six months, but those thinking about or avoiding starting a business tend to assume that it takes substantially longer, on average, deterring some from starting up.

Myth No. 3: It’s hard to get a bank loan to start a business.

Fact: While it may be slightly harder to get a start-up loan without a track record, only 10-20% of applications for a business loan are rejected, overall. Respondents thought that this rejection figure was significantly higher. There is, however, one group for whom this myth is actually reasonably accurate: individuals from lower socio-economic groups who lack initial capital.

Myth No. 4: A business plan is the most essential element in start-up.

Fact: Although many non-entrepreneurs believe this to be the case, business owners who have been through the process tend to downplay the importance of a business plan in favour of obtaining finance (although the former is often necessary for the latter). The learning process that accompanies the actual construction of a business plan is often considered to be more important than the plan itself. For some, it may prove to be a deterrent to start-up if they feel that cannot draft a business plan.

Myth No. 5: Small businesses don’t generate much turnover in their first year.

Fact: The average income, forecast by putative entrepreneurs for their first year of trading, is only half of the figure actually achieved by small businesses. The myth that it would be difficult to make an adequate living from a small firm is a deterrent to start-up.

Myth No. 6: Small firms spend half their time dealing with red tape.

Fact:  Businesses estimate that they spend around five hours per week dealing with bureaucracy; non-entrepreneurs estimated that this burden would be nearly twice as large. These mythical extra hours of dealing with red tape may be enough to dissuade some from starting their own business.

Myth No. 7: Most small firms fail within the first year.

Fact: the opposite is true: 80%-90% of small firms are still trading twelve months after start-up1. This myth is probably the most widespread, among the whole range of respondents. It wrongly inflates the degree of risk felt by those thinking of starting their own business, deterring some from moving forward.

Myth No. 8: There are significant tax advantages to being self-employed.

Fact: While there are definite tax breaks for the self-employed, would-be entrepreneurs tend to overestimate their generosity. This may lead to an ‘over-supply’ of the self-employed, which may prove to be unsustainable when individuals discover that tax gains are lower than they expected.