Start-ups boom during pandemic, but how to turn bedroom businesses into scale-ups

Maria Bichl, Head of Marketing at beyond

In this opinion piece, Maria Bichl, the Head of Marketing at local workspace providers beyond, explains how to turn bedroom businesses into scale-ups.

Amid countless stories of huge funding rounds, rapid international expansion plans and ambitious recruitment efforts, it can be easy for start-up founders to become somewhat disheartened if they benchmark their own progress against the headlines that abound in the media. In reality, just starting a new venture is hugely challenging, let alone scaling it into something that is profitable.

This is a position that many entrepreneurs will find themselves in at present. After all, there has been a boom in new company formations during the pandemic, which raises the question of how many will take that all-important next step to become a fully-fledged start-up, scale-up or SME.

For context, in 2020 some 781,000 new businesses were created in the UK – an all-time record. The following year, the trend continued: around 772,000 new companies were registered with Companies House. It is a trend that has been noted globally.

There were several converging factors at play here. For one, in completely altering consumers’ lives and how businesses operate, Covid-19 created a vast array of new market opportunities that many aspiring entrepreneurs reacted to seize advantage of.

Coupled with this, there was a sharp rise in job losses. According to the Institute for Fiscal Studies, around one million people in the UK were made redundant between April 2020 and June 2021. This compares with 550,000 for the same period in 2019. Further, over 11.7 million jobs were furloughed over the duration of the scheme.

In short, the push (job insecurity) and pull (new market gaps) came together to ignite millions of people’s entrepreneurial spirit. But what happens now is less clear.

Longer-term data analysis shows that around 32% of new businesses fail within their first two years, while only half survive to five years. A lack of capital, ineffective management, flawed infrastructure or business model, or a failure to market themselves effectively are all common reasons.

Taking the next step

What is unique about the start-ups that have emerged during the pandemic is that many were so-called ‘bedroom businesses’; they were created by individuals and run out of their own homes, either around an existing job or as their sole focus.

Another challenge for start-ups formed over the past 24 months is ensuring they remain relevant. As noted, many entrepreneurs will have started their new business in response to a gap in the market created by Covid-19 and its implications on our day-to-day lives. Yet as the world re-opens and a sense of normality has returned in 2022 – we are only now understanding what the “new normal” might actually look like – is there still demand for their products or services?

An obvious example is meal kits – either grocery boxes for people to make meals at home or DIY sets from restaurants. These boomed in 2020 and 2021, but there are already reports in both the US and UK that demand is falling sharply now the hospitality sector is fully reopened.

As such, the first challenge for start-ups as we emerge from the worst of the pandemic is to revisit their business model and growth plans, making sure they tally with consumer or business habits.

Assuming an entrepreneur can keep their offering relevant, the next question is how they can take a business that they may well be running from their spare bedroom or kitchen table and build it into something that can scale.

Building a base

Entrepreneurs running a start-up (which may consist of just them, or perhaps a handful of employees by now) have a difficult decision to make as to whether to continue operating out of their own home or local coffee shop or taking the plunge and moving into a physical workspace.

Indeed, start-ups and small businesses are driving demand for flexible workspace across the UK, particularly in entrepreneurial hubs like London, Manchester, Birmingham, Leeds and Cambridge. But why make the move into a flex workspace?

For some entrepreneurs, being able to distinguish between their work life and private life is crucial if they are to look after their mental well-being and avoid burnout. As many of us will have experienced, working exclusively from one’s home blurs the lines between our professional and private lives, making it harder to step away from the laptop and fully unwind. Having a designated workspace helps prevent this problem.

The infrastructure is also important. As stated earlier, poor business infrastructure is commonly cited as a reason for start-up failures; conversely, having a workspace with high-speed WiFi, meeting facilities, and even things like printers, scanners and photocopies can make the day-to-day running of a scaling business easier.

Attracting and retaining talent is even more crucial. Start-ups globally are fighting a ‘war for talent’ and fully embracing flexible working is seen as an important weapon in this battle – having a flexible, creative and inspiring space that employees can use on the days they want to head into “the office” is hugely valuable when looking to support hybrid working patterns.

One of the other key benefits of start-ups using a physical workspace is the networking opportunities it presents. Being surrounded by other entrepreneurs and scaling businesses can provide useful connections, insights and collaboration, helping an early-stage company to learn and grow in ways that would be very difficult if it was an entirely remote operation.

At beyond, we believe strongly that workspace providers, too, must recognise the need to support start-ups at this critical juncture. In the UK, small businesses account for 99% of all private companies – they are the lifeblood of the economy and ensuring their success in the years to come will go a long way to boost the national and, even, global economy. Offering true flexibility – not just in the make-up and fit-out of the workspace, but also in the terms and leases – will provide start-ups with the opportunities they need to scale from bedroom businesses to fully-fledged SMEs.

It is going to be extremely exciting to look back on the entrepreneurial boom during the pandemic and celebrate the success stories to have emerged from such a challenging period. But those success stories will be truly established in the next 12 to 24 months as we transition into the actual “new normal”.