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Living during a pandemic has been a tough experience for everyone, and being directly responsible for their own livelihood (and potentially the wellbeing of many others) has given business owners a unique perspective.

With this in mind, we wanted to speak to small business owners and gauge the impact this has had on their mental health. To find out what keeps them awake at night, and what external factors might have contributed to these worries – for example Brexit, the pandemic, the strain of running a business, and sudden remote working.

Our research polled 713 SME owners to reveal how these fears have manifested themselves in people’s behaviour, happiness, energy, productivity, and concentration levels, as well as their appetite to continue running a business in the future.

Why was 2020 a record year for new business incorporations?

2020 saw the inception of a record number of small businesses in the UK. While this is partly a result of the pandemic’s far-reaching effects, such as redundancies and furlough, the influx of start-ups can also be attributed to the fact that starting a business is now even easier than ever.

Our previous research into pandemic-born businesses, The Boom or Bust Report, looked at the new businesses taking the plunge during the pandemic. The report illustrates the complex reasons so many people had for taking their first steps as entrepreneurs in the midst of a global pandemic.

We wanted to understand what inspired owners to become their own bosses, and now we investigate whether the reality of taking their career and earning potential into their own hands matches their expectations.

Motivations for becoming a business owner – a better work-life balance?

In a survey of more than 700 small business owners, almost half (47%) attributed financial reasons as a motivation for starting their business, including the desire to earn more than they did before, or break free from a traditional salary or commission structure.

The need for a better work-life balance was the second most popular reason (43%), with a number of notable studies finding that working from home during the pandemic had led to employees working longer hours. Microsoft’s own Modern Workplace Transformation team worked four hours more each week. A study published in the journal Nature Human Behaviour found that the workweek increased by 10% following the move to remote work.

Our research also revealed two-fifths (40%) of owners started businesses for personal development reasons, while a quarter (25%) did so as they wanted a career change.

A fifth (19%, or 137,940 out of 726,000) of the businesses created last year, were started by people striving to improve their mental health, highlighting entrepreneurs’ desire for control over their own wellbeing.

Things to consider when setting prices
  • Financial reasons – 47%
  • Better work-life balance – 43%
  • Personal development – 40%
  • Career change – 25%
  • Mental health reasons – 19%
  • To spend more time with family – 19%
  • Redundancy – 12%

This trend towards mental health and wellbeing was further highlighted when the panel of SME owners were asked to identify what they found most challenging about working for someone else, before starting their own business and becoming self-employed.

41% of SME owners reported feeling underappreciated in their previous employment, something an American Psychological Association study found was linked to wellbeing and performance. Those that feel valued are more likely to report better physical and mental health, as well as higher levels of satisfaction and motivation, versus those who do not feel valued by their employers.

Not having enough scope for development (37%), difficult relationships with bosses (20%), and a lack of control over workload (28%) were also common contributors to employees making the move to becoming their own boss.

Again, financial motivation, in the form of not being able to earn the desired salary, motivated almost one-in-three (30%) to begin their own enterprise. A quarter (26%) also found long working hours challenging when working for someone else.

  • Not feeling appreciated – 41%
  • Not enough scope for development – 37%
  • Poorly managed organisation – 36%
  • Can’t earn desired salary – 30%
  • Lack of control over workload 28%
  • Lack of creativity – 27%
  • Long hours – 26%
  • Difficult relationship with boss – 20%
  • Lack of support from manager – 19%
  • Pressure to perform – 15%
  • Fear of being laid off – 10%

What are the positive impacts of starting a business?

Beginning a business is often filled with the promise of brighter days and the ability to have complete freedom. Our panel were asked if this was actually the case.

When asked what they were hoping for when starting their business, three quarters (75%) of SME owners said they anticipated more flexibility, six out of every ten (60%) envisioned a better work-life balance, and around the same saw increased earning potential (59%).

More than half (52%) of new businesses owners started with the ambition of more autonomy, and a similar number (48%) did so to increase their opportunities for personal development. Interestingly, 40% started a new business to provide a creative outlet.

More than a third (36%) aspired to improve their mental health, and 31% started their own enterprise to reduce the amount of daily stress. High levels of daily stress can lead to burnout and other serious mental health issues if left unaddressed in the long term. These mental health motivations for starting a new business were held by more than a quarter of a million (261,360) new business owners last year alone.

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  • More flexibility – 75%
  • Better work-life balance – 60%
  • Increased earning potential – 59%
  • More autonomy – 52%
  • Increase personal development – 48%
  • Provide a creative outlet – 40%
  • Improve mental health – 36%
  • More variety day-to-day – 35%
  • Less daily stress – 31%

Does owning a business improve mental wellbeing?

On the whole, entrepreneurs have seen vast improvements in their happiness since starting their own businesses. More than half (54%) said they feel much happier, 28% are better-off although it has been harder than they expected, and one in 10 (10%) are happier but not as happy as they thought they’d be. Therefore, the majority of those making the move to self-employment and beginning a business found it bettered their mental wellbeing.

Positively, just 1% of entrepreneurs polled said they were less happy since starting their business, and there are a variety of reasons for a less significant than expected change since becoming an SME owner, including financial support and a lack of mentoring.

Things to consider when setting prices
  • Yes, I feel much happier since starting my own business – 54%
  • Yes, but it has been harder than expected – 28%
  • Yes, but not to the extent that I imagined – 10%
  • No, my life hasn’t changed much – 5%
  • No, I am less happy than before – 1%

What are the biggest issues when starting a business?

Despite a significant proportion setting out with dreams of more money and a better work-life balance, a quarter (25%) of those SME owners who are less happy than anticipated are struggling to support themselves financially, and one fifth (22%) find switching off difficult, resulting in a poor work-life balance.

Government support and grants have been a big topic of discussion with some business owners finding themselves excluded from support. However, the Government has also provided a series of lifelines to businesses to ensure their continuity during difficult and unpredictable times.

Almost a quarter (22%) of entrepreneurs felt that administrative duties, such as filing paperwork or accounting, had led to feelings of unhappiness, as owners have a series of deadlines which they must adhere to. An additional 7% struggled with the broader type of work involved in being an owner versus an employee.

Some entrepreneurs (12%) are working longer hours than they were when they were employed. Encouragingly, only 2% found that having responsibility for employees increased their stress levels.

  • Difficulties supporting myself financially – 25%
  • Administrative duties of filing paperwork – 22%
  • More difficult to switch off than before, resulting in poor work-life balance – 21%
  • Having to work longer hours than before – 12%
  • Broader types of work involved than being employed – 7%
  • Increased stress due to responsibility for employees – 2%

The pandemic’s impact on SME owners’ mental health

When discussing mental health and entrepreneurialism, it is impossible not to consider the pandemic’s impact on SME owners’ mental health, with more than half (55%) citing it as having the most detrimental impact. This is more than twice as many as the next reason, with a quarter (25%) saying the general strain of running a business was most damaging.

A fifth (19%) of business owners said that Brexit had the greatest impact on their mental health, with huge disruption to the supply chain and the international workforce.

6% of SME owners said the sudden move to remote working for all non-essential businesses was most damaging, while the forced business closure for many public facing businesses played on the mind of 8% of SME owners, particularly in the hospitality and retail sectors.

In the next chapter of the SME Owner Mental Health report, we will examine how the pandemic affected entrepreneurs in greater detail, and look at the concerns that have kept them up over the past year.

  • Coronavirus pandemic – 55%
  • General strains of running a business – 25%
  • Brexit – 19%
  • Forced business closure – 8%
  • Sudden remote working – 6%

Learn more about our online accounting services for small businesses and startups. Chat to one of the team on 020 3355 4047, or get an instant online quote.

About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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