Starting a business in the midst of a pandemic

It was the lack of healthy eating options that struck EY accountants Luke and Rebecca Tonks as they visited industrial estates around north-east England carrying out audits. So, having decided a career in audit was not for them, they decided to fill that gap.

Their idea was a business creating and delivering vegan lunches, a virtual canteen for workers seeking healthy, sustainable nutrition.

And so, in March, Nourish Bud was born — just as the Covid-19 pandemic emptied out offices.

The Tonks pivoted to home deliveries, a temporary change that might become permanent. “I think the attitudes to working from home and flexi-working will be changed for the long term,” says 27-year-old Mr Tonks. But another trend has moved in their direction. “Everybody is considering their health a lot more due to the Covid outbreak,” says Ms Tonks, 28.

The couple are not the only entrepreneurs who have had to adapt to rapidly changing trends. But would anyone actually start a business in the middle of a pandemic?

The question highlights a phenomenon that has been under-appreciated amid the economic gloom of Covid — recession, unemployment, and business failures. In fact, a crisis also creates entrepreneurial opportunities — especially when, like this one, it coincides with technological revolution. It is not just the likes of Amazon, Facebook and Ocado that can profit from disruption. Start-ups and small companies too have a chance.

Luke and Rebecca Tonks built their business on healthy eating choices © Mark Pinder/FT

“When there is more uncertainty, there is more reward,” says Steven Mason, senior manager at Inquesta, a corporate insolvency specialist. “There are a lot of opportunities.”

Or as Mr Tonks puts it: “Covid is potentially a really great opportunity for small businesses. Consumer attitudes and practices are changing completely.”

But, as our conversations with company owners also show, this is a time of huge risk. So consultants urge entrepreneurs to take whatever practical and legal protection they can and secure government help, if they qualify.

Financial advisers say would-be entrepreneurs must consider not only the business but their personal finances. Common sources of funds — including savings, an extra mortgage on a family home or an early withdrawal from a pension fund — can have implications for long-term personal economic wellbeing.

The pandemic has struck at a peak time for entrepreneurial activity. The annual report from the Global Entrepreneurship Monitor (GEM) in November showed that in 2019 the UK recorded its highest rate of early-stage entrepreneurship since the global annual survey began nearly 20 years ago.

Nearly 1 in 10 working age adults were in the early stages of starting or running a business, with female early-stage entrepreneurship hitting an all-time high, says the report. Younger people, aged 25-34, were the most likely to be starting or running a business.

With many undeterred by Covid, the number of companies is still growing fast. At the end of September 2020, there were 4.63m companies on the Companies House register. While that includes almost 396,000 being dissolved or liquidated, it is still 120,257 more registered companies than at the end of June.

Admittedly, a moratorium on company dissolutions, now ended, and the government’s pandemic support measures have inflated the number of surviving companies.

But the number of new businesses registered in the third quarter of 2020 increased by 51,269 (30 per cent) compared with the same period last year. This is the largest third-quarter increase since 2012, when quarterly breakdowns were first recorded.

Mr Mason says: “Interest rates are low, property is cheap and there are lots of skilled unemployed staff around. Once we get out of this we ought to see busy bars and restaurants again. If you have got a good idea fit for the times it could fly.”

But Mark Hart, professor of Small Business and Entrepreneurship at Aston Business School, cautions against simple optimistic conclusions.

The deputy director of the university-backed Enterprise Research Centre, which is looking into the surge in new companies, speaks of “crisis entrepreneurs”. He says: “These are people who have lost their job and have no other choice in the labour market” than to go into business on their own.

By the same token, many quit self-employment to become employees, as the government cracked down on companies using freelancers to reduce wage and tax bills.

Prof Hart suspects a flight to safety contributed to the registration surge, driven by self-employed people who ran businesses as unincorporated traders establishing companies.

It requires extra cost and administration such as filing annual accounts, but is a straightforward process and brings increased protection from creditors, including lenders. Mr Mason says: “I would always take the view that if you are going to start up make sure you are not putting your own assets on the line.”

The drive to incorporate was compounded by a sense among entrepreneurs that they have been abandoned by the government and left out of key support schemes.

“With no safety net, many have been left facing financial ruin through no fault of their own,” says Prof Hart. “If you are setting up now you are far more likely to incorporate.”

People who have fallen through the net include those who recently started a business, so do not have a full year’s filed accounts, as well as those who derived less than half their income from self-employment. About 3m are affected. 

That said, it’s still not easy even for a company to secure credit. Banks have long been careful of lending to a company, precisely because creditor protection could prevent them getting their money back. And there are delays in opening business accounts right now because of a processing backlog.

Government policy has not been wholly favourable for entrepreneurs with companies. Rishi Sunak, the chancellor, has so far refused to compensate company directors who pay themselves through dividends rather than a salary, arguing they have benefited from past lower tax bills. This affects around 2m small UK companies, mainly run by owner-directors.

Researching a wide pool of potential financial backing is essential, say business advisers. England has regional Growth Hubs, which advise on starting up and finance options, and there are similar organisations in the devolved nations.

Luke Hamm, chief executive of GovGrant, a consultancy that helps companies get grants and tax breaks for innovation, says that focusing on genuine research and development can open up specific government funding and tempt investors. 

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However, he warns that a business idea must be genuinely innovative. “Merely jumping on the bandwagon of a certain trend only serves to make a start-up unattractive to investors — they need to see real, sustainable R&D.”

Private investment remains available for some. Low interest rates have led many investors to look for new opportunities, such as high-growth SMEs. Crowdfunding platforms such as Seedrs and Crowdcube — which are merging — remain open for business, as do peer-to-peer lenders including Funding Circle.

Start-ups can also seek out a business angel, a rich individual who combines the search for a profit with interest in the business and can act as a mentor. 

Investing by angel networks has dropped sharply in 2020 compared to 2019, according to Beauhurst, a data company. However, last year was exceptional, with £423m invested; 2020 will not fall far short of the annual £200m raised in 2016-2018, says Beauhurst.

Gary Tipper, managing partner at Palatine, a private equity house investing in more established businesses, expects 2020 to be the firm’s busiest year since it was founded in 2007, with four deals concluded and three in negotiations. He says: “There is a lot of pent up demand. Market prices [for businesses] are going up as there is a lot of dry powder.”

The two hospitality businesses Palatine has backed have needed extra funds, and its restaurant chain, Gusto, went through a compulsory voluntary arrangement, allowing it to cut debts and reduce rents.

“Hospitality, consumer and leisure have taken a hit but most of our B2B companies are back to pre-Covid levels,” Mr Tipper says. For example, there is TTC, which provides training and compliance services and has switched from classroom-based sessions to online.

Certainly, the economic outlook remains clouded, with the UK in deep recession, and doubts about the scale of the eventual recovery. Government support is set to drop over the coming months, while companies are still shedding labour and closing operations. In his spending review this week, Mr Sunak said the economy would contract this year by 11.3 per cent, the largest fall for 300 years.

Nourish Bud moved into its business premises after a rival pulled out © Mark Pinder/FT

But still, David Ewing, managing partner at ECI Partners, a private equity firm that invests in bigger companies, said it could be a good time to expand. “If you are well-positioned it is still possible to invest for future growth and not just survive, but thrive.”

He says companies that were still financially robust can buy struggling businesses. “We’d expect to see more M&A activity over the next year and consolidation in certain markets.”

Competition could ease too as companies propped up by state support succumb as it is withdrawn. Some 14 per cent of companies said they were unlikely to survive the next three months, says a survey published by the Office for National Statistics in November. 

Nourish Bud is among the companies to have benefited from a rival pulling out. The nearly-new, well-located premises, rented by the Tonks for £450 a month, was previously occupied by a Thai food delivery business. They bought the existing catering equipment for £10,000 and spent £4,000 on more.

They funded the business from savings and prepare all meals from scratch: even the coconut milk is home-made. With monthly turnover slightly below £5,000, they are past break-even, but are well short of an adequate income and hope increased volumes will boost profits.

Despite working 16-hour days, they have no second thoughts about leaving behind their £37,000-a-year office jobs. Mr Tonks says: “It’s the ability to control our own lives and do something we’re passionate about — and the eventual hope of earning an awful lot more.”

Nor are there are any regrets about starting when they did. Ms Tonks argues that the pandemic has shown the importance of plant-based eating. “It’s one of the most respectful things you can do for the environment, especially when you think where the virus stemmed from.”

Health business reorganises in the face of the pandemic

Growth on hold: entrepreneur Sarah Grant © Mark Pinder/FT

This was to have been a great year for entrepreneur Sarah Grant, marked by rapid business growth and her wedding.

Instead, My Healthcare Recruit, which handles international recruitment of nurses for the NHS, private hospitals and nursing homes, was at a standstill for three months in spring, despite the need for extra medical staff as Covid-19 spread.

Ms Grant of Gosforth, Newcastle upon Tyne, had to cope with cancelled flights, deployment bans, Covid-positive candidates, quarantine and lost contracts. The company she founded in 2017 is paid at the point of placement. But no recruits could enter the UK to start work in jobs they had clinched following detailed selection and video interviews. So income dried up.

The first warning came in mid-March when the Philippines, her main recruitment location, barred anybody from leaving. At first, Ms Grant thought a lull would give her time to tackle business-enhancing projects. “I try to see opportunity in difficulty,” she says.

Instead, the cost of retaining her team — five in England and one in the Philippines — became an increasing worry. “I was so grateful for the furlough scheme,” she says. “I was just delighted there was support for the staff.”

The business spent about £10,000 on administrative problems. There was also, says Ms Grant, 32, “opportunity cost”. She cut her pay but she does not share some entrepreneurs’ anger at missing out on government support. She considered taking a government-backed loan but then things picked up. In August, when her first nurses since March arrived, she felt “just massive relief”.

My Healthcare Recruit is now racing to catch up. This year, instead of seeing a projected 50 per cent rise in turnover, should match 2019. Deployment will be around 250, comparable to last year.

Fortunately, the company was already virtual, with staff based around Britain. To increase resilience, Ms Grant added the Middle East to the Philippines and India for recruitment. And she is funding Netflix subscriptions for quarantining new arrivals.

Despite the uncertainty, she remains positive. “I really believe in what we do; it’s a really lovely business to work in.” In 2021, she expects growth to resume. And she will get married, with the wedding rescheduled for August.

Making the most of an opportunity

A pandemic can be an opportunity, writes Lindsay Cook. All it takes is the vision to think up a new product or service that can take advantage of the limitations of the “new normal” — plus hard work, support and luck.

One approach would be to identify the commercial prospects created by the collapse of the traditional high street, the shift to homeworking, and the resurgence of the small town. As many companies rethink the value of expensive city centre buildings, there may be opportunities to repurpose such spaces as bike parks, or even city farms.

Starting a business needs funds, backing, and skills, plus the ability to survive with little sleep and no money for decent food, let alone treats.

© FT montage/Getty

The over-50s and under-24s — who have frequently suffered worst in the pandemic jobs market — could be best placed to start on their own account. They need the income to replace their lost employment and, often without young families to support, they can perhaps take greater risks. 

Getting funding
The over-50s, who have been made redundant with a payout or have perhaps received an inheritance, often have the necessary extra financial firepower. Younger people may be able to access the Bank of Mum and Dad or the Bank of Grandma and Grandpa for a business loan. Their interest rates should at least be cheaper than commercial ones. 

New businesses are too late to qualify for the pandemic-linked self-employed income support scheme. There is, however, the government’s Start-Up Loan scheme, which offers loans of £500 to £25,000 charging 6 per cent interest. For those on universal credit, the enterprise allowance provides up to £1,274 over 26 weeks.

A halfway house is to get a part-time job. It may be possible to learn a little about start-ups by finding a role in an organisation such as or

Any business needs a separate bank account. That may currently be a problem for newcomers, because several big banks are now not open to new business customers. Lloyds, for example, is not currently accepting applications.

For those who cannot get a specific business account straightaway, it is worth waiting or repurposing an existing current account for business.

Entrepreneurs should keep on top of their finances by using accounting software. For example, there is xero, which is recommended by freelancers because it has video tutorials, making it easy to use.

Everyone starting a business needs support from experienced people. Family and friends may warn you off but will have tips. Guidance is also available from professional organisations, the Federation of Small Businesses and websites such as, with information for the self-employed.

Use social media
Update your LinkedIn profile to promote your skills and experience to future clients. The online platform, with more than 675m members, was set up to connect professionals. Expand your presence on Facebook, Twitter, Instagram and elsewhere.

Make sure you get paid
Several contributors to suggest that new businesses should be bolder when discussing pay rates, make sure they charge enough and insist on contracts with a 50 per cent deposit paid in advance and 50 per cent on completion. 

Insure the business
Household insurance is unlikely to cover your business. You need cover for public liability, professional indemnity, equipment, tools, stock and business buildings. 

Consider a franchise
Buying a franchise offers a ready-made route to setting up a business. At the end of 2019 there were about 48,000 franchise units in the UK — up about 25 per cent since 2001. I have come across many early-retired people, who have bought a franchise, often for their children to take over later. The most popular allow work from home with maximum flexibility. A plus in the pandemic.


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