Starting a small business is full of personal risk, particularly when the boss is relying on the value of their home to keep it afloat.
The Sunday Times reported this month that nearly half of borrowing by the UK’s small and medium-sized enterprises is backed the business owner’s own property.
That makes such businesses horribly exposed to house price changes and relying on a property to be a never-ending cash machine is, in my view, simply madness.
Starting and running a business is a huge financial gamble, which often puts personal property on the line. It’s no wonder many are put off.
There are many talented recruiters out there who are perfectly suited to making the leap to launching their own start-up, but feel unable to because they have a mortgage, are married with children or are simply not prepared to risk things like their beloved home in order to make it happen.
That’s perfectly understandable, and it’s precisely for reasons like this that The Recruit Venture Group exists in the first place. If we meet a driven, successful recruiter, already in the industry and wanting to break free and forge their own business future, we will put up 100% of the finance to make it happen through our unique joint venture model.
No ifs, no buts – if we like the business plan, we make the cash available. That person doesn’t have to even think about remortgaging the house, living month to month off credit cards, or going cap in hand to lenders who will have them over a barrel.
Not only can they embark on their business journey without the stress and hassle of raising finance, but we also take care of all of the costly and time-consuming back office functions like HR, IT, payroll, accountancy, marketing and legal services. Believe me, that’s another huge saving given the cost to contract in some of those services. Again, this is all about liberating talented recruiters to go out into the marketplace and do what they do best from day one to make their business thrive.
The Sunday Times report also found that company directors own housing property worth £1.5 trillion. Lending against these assets is a ready source of finance, particularly for small businesses. But a 10% fall in house prices would wipe off £4.5 billion in annual business investment, seriously impacting small and medium-sized enterprises.
The Recruit Venture Group is working in partnership with 43 recruitment businesses right now, and not one of them would need to gamble on a house price rise if they wanted to invest to expand their business.
If a business owner we support has, for example, a sound plan to open a series of new offices, The Recruit Venture Group can make the money available to enable that expansion. While another small business owner might have the stress of borrowing against their house to make it happen, our partners are given the cash and allowed to get on with it, hassle free.
The business world can be unforgiving, and small business owners have more challenges than most when it comes to surviving. Fundamental to the success of any start-up is knowing how to reduce risk. That may sound counter to what entrepreneurship is all about – risk taking – but new businesses are only as strong as their financial backing at the time. And nobody can convince me that a business model reliant on annual house price gains is a good way to foster start-up growth.
Luckily for talented recruiters, there is another way, which not only allows recruiters to forget about risking their homes, but also offers the full suite of back office support that will allow them to focus on making their new business a success.
An Englishman’s home might be his castle, but it shouldn’t be relied upon to be the company cash machine as well.