The Mental Cost of Running a Small Business

The evidence shows that small business owners are disproportionately affected by mental health issues compared to the wider population. Largely driven by the stresses of owning and operating a business, SME owners are susceptible to a range of mental health problems.

A study from SimplyBusiness found that 80% of small business owners have suffered with poor mental health at some point. Almost two-thirds suffered from anxiety, with 38% reporting depression and 22% reporting feelings of loneliness.

Financial concerns are common too – with 19% of SMEs thought to be unable to survive an immediate loss of income, most small business owners are living close to the edge. This prevents good quality sleep – many small business owners sleep for less than five hours a night. Simply, small business owners are under-slept, under-funded and overworked.

In aid of World Mental Health Day on October 10th, the invoice finance professionals at Anglo Scottish Finance take a look at the real mental cost associated with running a small business, assess the factors behind these trends and suggest strategies for combatting mental health issues.

Money worries

By nature, running a small business can be a stressful challenge financially. Most have limited resources, while cash flow constraints are usually tight, with significant month-on-month income fluctuations. Many owners have invested their savings or taken out loans in order to get the company off the ground, so financial security is a worry before external factors even come into play.

And, sadly, small business owners have faced severe external challenges in the last half-decade or so, with independent businesses in the food and drink industry failing to regain the security they enjoyed pre-COVID and rocketing energy costs adding to concerns.

Their money worries will have been exacerbated by a number of other crippling increases; government-mandated increases to the National Insurance Contribution (NIC) means an increased per-employee cost for most businesses, while minimum wage increases have also led to reductions in the number of staff members that small businesses are able to employ.

Increased business rates are also having a serious impact, one which disproportionately affects small business owners operating in specific sectors. With the British Retail Consortium identifying that business rates equate to more than 5% of pre-tax profit for retailers, it’s a consideration that can’t be overlooked.

Burnout

Another contributor is the fact that small business owners consistently log more hours than the average UK employee. According to the most recent GOV.UK data, from 2023, there are over 5,547,000 SMEs listed in the UK. Of these, some 4,110,000 have no employees on the books, meaning the vast majority of small businesses are run by a single individual.

This means the burden of operating and maintaining the venture falls solely on the business owner, increasing both the likelihood of working long hours and the daily pressure they face to succeed. One in three SME owners work more than 46 hours per week – ten more than the average.

In many cases, being the sole figure operating a business or side-hustle-turned-good means isolation – and in the e-commerce age, this can mean going days without human contact. So, it’s little surprise that burnout is another common factor affecting small business owners and their mental health.

So, where to look?

In small businesses where budget is tight and more formal support processes have not yet been established, accessing adequate mental health support is often difficult for employees, let alone owners. In larger enterprises with employee assistance programmes (EAPs), support is available at all levels. So, the question remains, how can small business owners implement measures to fully support their mental health?

Increasing financial security

In order to reduce stress over financial insecurity, small business owners must use all of the tools at their disposal to insulate their business against cash flow problems. Short-term finance methods like invoice and bridging finance will protect against late supplier payments.

Setting manageable work-life boundaries

For small business owners, sensibly setting boundaries between work and life responsibilities will make it easier to help switch off.

Accessing online resources

Companies like Mind offer a range of online resources that provide additional support, wellness action plans and more.

Sharing experiences

Sharing your experiences with other likeminded individuals could offer new perspectives and insight. There are plenty of online forums aimed at small business owners – reddit’s r/smallbusinessuk community has almost 50,000 members.

Proactively tackling financial worries

Facing issues like debt head-on can be daunting. However, speaking to financial advice phone lines or a debt helpline can offer qualified guidance while offering the added benefit of sharing your problem with somebody else.

If you are finding that your small business is causing financial pressure, do not be afraid to reach out to your bank, funder or broker for support. The Financial Conduct Authority (FCA) mandates that firms must provide good outcomes for all customers under the Consumer Duty, including those in vulnerable situations.

Financial firms should have processes to recognize vulnerability, use clear communication and offer tailored support to avoid negative experiences and ensure fair treatment for these customers.

While it’s important to know the challenges associated with setting up and running your own business, it’s also important to know that owning your own business can be incredibly rewarding, providing a route to financial freedom that might not otherwise be possible.

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Credit:  Anglo Scottish Finance

AdobeStock | Rakchanok

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