Written by 5:53 pm Investing, Money & Lifestyle

Five ways to save to start a business

About 7 minutes to read

So you want to start a business — that’s pretty exciting.

Maybe you have a great idea — something that you’re sure could solve a fundamental business problem or address a particular social need. Maybe it’s a passion project, something you’ve always wanted to do. Or maybe you want to be your own boss, choosing to become self-employed or go freelance in order to have that little more control over your own work and life.

You don’t always need a lot of capital to get a business off the ground — but money almost always plays a role, even if it’s just in the form of savings to fall back on in case things don’t work out.

Here are a few ideas on where you can start.

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Personal savings

Most entrepreneurs start their businesses with their own money. Sometimes called ‘bootstrapping’, this means that they’re not taking out loans or looking for investors, they’re choosing to use their own money to kick things off.

The great thing about using your own money to start up is you’re not reliant on anyone else. Plus, you’re not taking on new debt or giving up control to equity investors who may become stakeholders and decision makers in your business.

Rogan Allport, founder of Rebellion Strength in Cardiff, says bootstrapping was at the core of his entrepreneur journey. “From the outset I knew I wanted to fund everything myself. I couldn’t take money from, say, my family or anything, so I looked at what sacrifices I was willing to make to my lifestyle. To start with, I made a list that categorised my expenses, splitting things into what I needed and what I didn’t. I was careful not to make it all about the grind, which is a sure way to burn out, but it was a good way to save money that could go into the business.”

“One of my key learnings from bootstrapping was how to fail small,” he adds. “I made sure to test and learn things on a small scale, like with Facebook marketing, in order to minimise the risks. It made me innovative and really think about the ‘free’ things I could do — there’s a lot that can be done that is time-intensive but reward-heavy if you’re willing to put in the hours, which is why I built a Facebook community and put myself out there as much as I could instead of spending money on performance. It was scrappy but it made sure my business was built very strategically. I can now outsource certain things like accounting and pay myself regularly, but it’s all because I put in that graft early and bootstrapped the business.”

Of course, using your own money does come with its own risks — not least the strain it puts on your finances. Having a strong savings pot even after you launch can be crucial, with experts suggesting you’ll want between six months to two years’ take-away pay as a safety net. This gives you a nice cushion in case things don’t work out but also allows you to spend significant time at the start to really focus on your business without worrying about what money you’re bringing in.

Rogan says, “Money can really impact your mental health, so if you’re starting a business, make sure you have a complete division between your personal and business finances. If you’re just throwing all your cash into a personal account and trying to track it, that’s a recipe for disaster. Never let one blur into the other, think of it like church and state. This also creates really good money habits.”

One of the six ikigai Goals is designed to support the ambition of starting a business, so it’s also worth looking into the apps that give you visibility and insight into your money, supporting your ambitions as you save.

The Side Hustle

According to the Office of National Statistics, more than a million people in the UK now have a “side hustle” outside of their main job. There are many reasons to have a side hustle –from extra income to growing your skill set — but you can also use a side hustle to test run your business idea without giving up your day job. This has dual benefits of helping you nurture your business with less risk to your financial security and also allows you to save for your idea full-time.

“I started freelance content writing whilst I was working full-time in music,” says Jess, a 31-year-old from London. “My role wasn’t that creative so doing the writing on the side was a good way to build up my portfolio and make contacts before diving in full-time. It also meant I didn’t feel quite so nervous about money when I did finally take the leap, as I knew that I could do it and that at this point it was my day job getting in the way of my freelance business.”

Like Jess, it may be wise to start small and let your side hustle grow naturally. As Emma Gannon, author of the Multi Hyphen Method — a book all about the power of the side hustle — told the Telegraph, “Don’t invest huge amounts of time and money in it at first. Don’t think of it as launching a startup (even if that is in fact what it eventually becomes). Start small and work on your idea in bursts.”

Friends and family

Now, as we know, borrowing money from our nearest and dearest can be a very tricky line to navigate — but according to a 2018 study, it’s also how around 80% of UK businesses got their start.

Borrowing from a friend or relative for your business is something that should be treated professionally. It’s worth making sure that everything is in writing with clearly defined repayment terms from the start. But there are different ways to approach your friends when looking for financial support for your business too. For example, if you’re running a store or selling products, see if they’ll consider buying from you? Alternatively, you could consider using a crowd platform to encourage them (and their networks) to pitch in.

Remember, it’s not just extra funds that you can gain from your close networks too. You can practice your pitch with your partner, ask for feedback from friends, draft in your siblings to help in a pinch, or even ask your parents for advice. This is something I’ve benefited from as a freelancer — for example, running ideas by my flatmate (who is also a writer) or discussing my business accounting needs with my brother. They’ve played an invaluable part in my business journey, even without lending me a penny.

Loans, grants and alternative finance

Taking out a loan is a very common way to ensure you have access to finance during the early stages of starting your business. In fact, Rajesh Agrawal, the now Deputy Mayor of London for Business, famously took out a car loan whilst starting his first business, RationalFX, in 2005, saying, “I had no savings when I quit my job at 27, so […] this money was my buffer to live on for the next 18 months. I also increased my credit card limit, which was a very expensive way to fund a new business.”

Rogan similarly mentioned that he’d taken out a Bounce-Back Loan during the pandemic in order to give himself a financial cushion. “Everything until lockdown was owner-financed, but upon reflection, I might look at loans in the future as well in order to grow further. Some people are afraid of loans, but from what I’ve seen they can support expansion plans and may offer better terms than personal credit cards too.”

Therefore, if after bootstrapping and side hustling you’re looking for more capital, there are many small business loans and alternative financing options that you may want to explore.

It’s always worth doing your research when it comes to loans — not just to find out what you’re eligible for but also whether certain loans are right for you. For example, a start-up loan may allow you to borrow up to £25,000 (though the average is about £7,200) as a government-backed personal loan, but you may not actually want a lump sum sitting in your savings if your real issue is plugging cash flow gaps as you get started. In this case, you may find that working capital loans or a business banking overdraft is more suited to your short-term needs.

Another thing you can consider is what grants you might be eligible for. They’re not necessarily the easiest to find or get, but they do exist — with most of them being linked to location or sector. For example, the Prince’s Trust Enterprise Programme works with 18–30 year olds who are looking to develop a business, whereas Innovate UK Smart Grants are geared towards STEM businesses carrying out ambitious R&A projects with a view to commercialisation.

SmallBusiness.co.uk has an extensive list of these grants, highlighting the criteria for application as well as the status of the grants in view of Covid-19. It’s well worth reviewing.

Investors and funding

Angel investors and VCs are always looking for the ‘next big thing’. They constantly have an eye out for new high-growth startups and may invest if they believe in you and your business idea. There’s no guarantee and the process can be long, but there are two key things to consider if you want to go down this route.

Firstly, you should be absolutely sure of your business goals and how much money you’ll need to reach them. If you’ve ever seen Dragon’s Den, you’ll know that not having clear objectives and a firm grasp of your financial needs is a sure-fire way to lose an investor’s interest.

Secondly, it’s always worth considering whether VC funding is right for you and your business, particularly when you’re just starting out.

Alex Depledge, co-founder of residential architecture company Resi, sold her first business Hassle.com in 2015 for £27 million, having gone through several seed rounds and a Series A. However, with Resi, she and co-founder Jules Coleman chose not to go down the VC funding route — at least not in the early stages.

“What we realised is that the number of businesses that could benefit from venture capital is actually quite small,” she explained to Computer Weekly. “I think it’s great for some businesses, but actually for a much smaller percentage of businesses than are actually raising venture funding. We just believe in right-sizing financing.”

At the end of the day, saving to start a business is about understanding your financial needs. As tempting as it sounds, you can’t just wing it and hope for the best. You need to take the time to research your options, save up a safety net, and figure out what approach will work best for your business and vision.


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We built ikigai specifically for those who want to bring their lifestyle to the next level, by taking better care of their finances.

ikigai beautifully combines wealth management and everyday banking in one single app. And by doing so, it creates a whole new world of opportunities.

Visit https://ikigai.money to find out more.

Maurizio & Edgar, Co-Founders, ikigai

When investing, your capital is at risk.

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Last modified: 23 November 2020
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