Is It Harder to Make a Profit Today Than 30 Years Ago?

We often hear the phrase "it's never been easier to start a business," but is that the whole story? While technology has certainly reduced barriers to entry, the question remains: Is it actually harder to generate consistent profit and sustain a business in today's economic climate compared to 30 years ago?

As proactive accountants who specialise in helping businesses drive profit and manage cash flow effectively, we decided to take a journey back through time to compare the business environment of 1995 with today's landscape in 2025.

Starting vs. Sustaining a Business

There's an important distinction to make right from the start:

• Starting a business has undoubtedly become easier with platforms like Shopify, Amazon, and social media removing traditional barriers to entry

• Sustaining a business and generating consistent profit may have become more challenging due to increased taxation, regulations, and competitive pressures

  
  

The Business Environment of 1995: A Time Machine Journey

Let's look at what business owners faced in 1995:

Taxation Structure

• Corporation Tax: 33% main rate, with a generous 25% rate for "small businesses" (profits up to £300,000 - equivalent to nearly £1 million in today's money)

• Employers' National Insurance: 10.2% for earnings above £3,016

• VAT: 17.5% standard rate, 8% reduced rate

  
  

Regulatory Environment

• Pension Obligations: No statutory pension obligations for employers

• Compliance Regulations: Significantly fewer regulations to navigate

• No GDPR, ICO, or modern cyber security requirements

  
  

Fast Forward to 2025: Today's Business Reality

Modern Taxation Structure

• Corporation Tax: 25% main rate (lower than 1995, but the small business threshold has dramatically decreased to just £50,000)

• Employers' National Insurance: 15% (a 50% increase from 1995)

• VAT: 20% standard rate, 5% reduced rate

• Auto-enrollment Pension: Mandatory 3% employer contribution

  
  

Today's Regulatory Landscape

• Data Protection Act 2018 and GDPR compliance requirements

• Digital Markets, Competition and Consumers Act 2024

• Enhanced Environmental Regulations

• Anti-Money Laundering (AML) requirements

• Employment Rights Bill

• Industry-specific regulations (e.g., Plastics Packaging Tax, Sugar Tax)

  
  

Does Technology Offset These Challenges?

One might argue that technological advancements should have increased productivity enough to offset these additional costs. However, the UK's productivity puzzle remains unsolved, with stagnant productivity growth despite technological leaps.

As Finance Directors who work with businesses across various sectors, we see that many companies haven't fully embraced the technological tools available to them. The businesses that thrive today are those that:

1. Utilise digital tools to streamline operations

2. Implement robust Management Accounts systems to track performance

3. Focus on Cash Flow management with the same intensity as revenue growth

4. Work with a Finance Manager who understands modern business challenges

5. Make data-driven decisions based on accurate Profit & Loss reporting

   
   

The Human Element: A Fascinating Observation

One interesting pattern we've observed when working with family businesses is how different generations approach business management. The founding generation often built successful enterprises with minimal external support, while the current generation frequently seeks consultants, coaches, and external expertise despite having access to more information and tools.

This suggests that while information is more abundant, the business environment may indeed be more complex and challenging to navigate alone.

Conclusion: Is It Harder to Make a Profit Today?

The raw numbers suggest that tax burdens as a percentage of turnover haven't significantly changed (approximately 9-10% of turnover goes to taxes both then and now). However, the regulatory burden and competitive landscape have transformed dramatically.

Our conclusion? Starting a business is easier, but building a sustainable, profitable business requires more strategic planning than ever before.

For business owners looking to thrive in today's environment, working with a proactive accountant who understands both the numbers and strategic growth is no longer optional – it's essential. The most successful businesses today combine technological advantages with expert financial guidance to overcome the increased regulatory and competitive challenges.

Need Help Navigating Your Business Finances?

At Profit Cash Growth, we specialise in helping businesses drive sustainable growth through expert financial management. Our team provides comprehensive services including Management Accounts, Cash Flow forecasting, Bookkeeping, and strategic Finance Director services to help you build a more profitable business.

Contact us today to discuss how we can help your business not just survive but thrive in today's challenging business environment.

Contact us at marketing@profitcashgrow.com to share your business story! Did you start your business in 1995? We'd love to hear about your experience and how it compares to running a business today.