Should you start a new business in the wake of the Covid pandemic
Firms collapsed, staff were made redundant and the economy shrank overnight as Covid hit in 2020 but in the wake of the pandemic a record number of new businesses could be created.
Those left jobless by the pandemic are looking at new ways to make money and entrepreneurs are building new businesses from the ground up even in these challenging times.
A staggering 396,155 UK firms closing in 2020 according to the Office for National Statistics, as business owners struggled to cope with restrictions and lockdowns and it isn’t over yet.
The Federation of Small Businesses expects that a further 250,000 small businesses could fold by the end of this year.
However, a massive 407,510 new businesses were launched during 2020 and Matt Smith, director of policy and research at the Centre for Entrepreneurs, predicts a “record number of new businesses” will also emerge this year.
It was those businesses that were able to tailor their goods and services to the situation that were able to survive and even thrive including retailers that moved their operations online and those that were able to offer delivery.
Although restrictions have now eased, those businesses that continue to adapt and evolve are the ones that will flourish through the second half of 2021.
For those who are yet to take that business idea from the drawing board to the next level, now is the time to consider taking the leap because Government support is due to taper off.
Opportunities for new businesses
It may not seem the ideal to launch a new business when so many others are struggling but this is exactly why now could be the perfect opportunity.
Businesses that were unable to survive the pandemic have left gaping holes in our high streets and you could capitalise on this reduced competition. Alternatively, you might consider buying an existing business where the previous owner is thinking of moving on, and where you have some new ideas to inject.
And while some individuals have been hit hard by the pandemic, others have benefited financially by being able to cut travel costs and save on childcare, all while forced to reduce their leisure spending.
Now lockdown has been lifted they want to splurge and treat themselves be it with material items, days out or experiences – and your business could be providing that opportunity.
In post-Covid times, loans may be easier to secure for some, and the Bank of England’s base rate of interest remains at a record low of 0.1%, which has been the case since 19 March 2020. This could really help you if you need to borrow capital to make your dream a reality.
In June 2021, the central bank’s monetary policy committee unanimously voted to keep the rate at this level, so businesses can expect commercial banks to continue charging relatively low interest rates for the foreseeable future.
Businesses will also be able to enter a restriction-free trading environment while still being able to benefit from the schemes and policies that the Government created to protect firms against the worst economic impacts that restrictions had on business.
For instance, while the window has passed for new businesses to defer their VAT payments, they may nevertheless be able to see some security with smaller VAT obligations.
On 8 July 2020, the Government allowed VAT registered businesses to apply a temporary 5% reduced VAT rate to certain supplies relating to hospitality, hotel and holiday accommodation and admission to certain attractions and this is now extended to September 30 – with a reassurance it won’t shoot straight back to 20%
New businesses like cafes, restaurants, pubs and hotels may also be able to get a two-thirds discount on their business rates bill for the rest of the 2021/2022 tax year.
Start-ups can take advantage of the kickstart scheme to save on their recruitment costs. The scheme sees the Government cover 100% of the national minimum wage for 16 to 24-year-old universal credit claimants, for 25 hours of work per week over a total of six months.
Challenges to overcome
There will always be challenges to overcome when establishing a new business and in a post Covid and post Brexit world those challenges may seem insurmountable.
First, businesses, especially those in the hospitality sector, are facing very real staff shortages, partly because many migrant workers have left the country but also because those forced out of work for the longest periods by lockdown have sought employment in other areas.
Meanwhile, university students who would be working part-time are studying elsewhere remotely, while some workers moved away from big cities to save money over the course of the pandemic.
Furthermore, some people are continuing to follow social distancing guidelines and are staying home to remain safe.
Steps to take
Before hitting the green button it is important new business owners look to mitigate any of the risks they could be facing, and work to address the challenges that could threaten their success.
While some people are remaining cautious, a new café could build in a delivery model alongside normal table service – although this could bring additional costs and pressures.
Generally speaking, new businesses also need a strong online identity to flourish in today’s digital age, whether they are business-to-business or business-to-consumer, and this includes working on SEO and social media presence to maximise organic traffic.
Crucially, entrepreneurs must think about the future and prepare for the worst and that means keeping a close eye on expenses to avoid overspending, and making multiple plans based on varying sales projections from the most pessimistic to most optimistic outcomes, so you are ready for whatever comes your way.
It also means keeping an eye on the deadlines for various Government support schemes, including the recovery loan scheme, which could benefit new businesses if the pandemic continues to trouble the economy.
Anyone looking to buy or start their own business in Suffolk or further afield can speak to our experts to help them with business structures, planning, financing and a strong tax strategy.