The first half of the year is a popular time for new businesses to start. According to research from Startup Britain, in 2016 80 new companies registered with Companies House each hour in the first half of the year. By November 2016 just under 600,000 new businesses had been registered.
On the face of it this is good news as business survival rates are as high as 91% after one year of trading, and 80% after eighteen months. However after five years just 4 in 10 start up businesses will still be trading.
So what are the main reasons for business failure?
Poor cash flow is the main reason and is usually caused by late payment of invoices. This is where good credit control is vital. This is something all small businesses can easily address.
No business plan. Every business needs to have a plan of what they want to achieve, where they want to be and how they will get there in the next twelve months. It doesn’t need to be long and shouldn’t be complicated. Once in place regular reviews of where you are against the plan will help identify what is going well and where action needs to be taken.
Heavy reliance on one or two big customers. Don’t stop marketing because you think you are at capacity. You need a diverse customer base to keep you going in case your biggest account goes elsewhere.
Not changing with the market. Customer needs are always changing. Listen to your customers and act on the information they are giving you.
Marketing your business in the right places. This may be attending networking events, using flyers, and making the most of your website and social media presence. Decide which of these is best for your company and keep your presence known or easily found.
Poor management. As well as doing the day job you need to be keeping an eye on all aspects of your company. Money in the bank today does not necessarily mean that cash flow will be good next week. We your company grows you need to learn to delegate jobs so you can focus on doing what is key for your company.
Lack of data security or data back up can be catastrophic. No company can survive without computers these day – there is rarely any paper back up to bail you out. Ensuring that you have a secure system and that your data is backed up will mean that any technical impact on your business is reduced.
In order to help you with your business this year why not book a place on our Business Launchpad workshop, or look out for our guest blogs covering all aspects of running a business