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Growing Number of Small Businesses Opening – and Closing – In the UK

Companies / SME Sep 14, 2018 - 05:23 PM GMT

By: Anwar_Hossain

Companies

Last year, the Financial Times reported a record number of new start ups in the UK. It is a beacon of light in what have otherwise been difficult economic times over recent years, ones that will only get tougher as Brexit looms closer. However, there are two sides to every coin, and while the number of new businesses is nothing less than laudable, there is also the worrying statistic that around 20 percent of them survive less than a year.


What is causing this premature demise of so many entrepreneurial dreams? The tragedy is that it is seldom down to an inherently bad business model, and is more often down to factors that could easily have been avoided with a little forethought.

Running out of money

Cash flow is the single largest cause of new business failure. What could be more frustrating than having a full order book and clients who love your product or service but having to pull the plug on the business because you’ve run out of money and can’t afford to pay the workforce or suppliers? It happens time and again, and it all comes down to cashflow management and strict invoicing practices. For many new businesses, the focus is heavily on generating new business and satisfying customers – when the product or service has been delivered and the invoice sent, there is a tendency to move on to the next customer.

 

Not being focussed

The above is understandable, but it demonstrates the need to have someone who knows what they are doing in charge of finance and keeping their eye on the ball. Many entrepreneurs think they can and should do everything – and that is a dangerous road to go down. It doesn’t just apply to accounting and book keeping. IT support is another example of an essential function that can either be overlooked, or end up forming far too much of a distraction for the business owner.

In the startup hubs around the West Midlands in particular, companies like the one here have identified this phenomenon as a business opportunity, and provide outsourced IT support to companies of all sizes. It means the vital IT function is in professional hands and works smoothly and efficiently, and also takes a major non-core responsibility off the shoulders of management.

Failing to react

The business plan is core to the startup, but many entrepreneurs see it as a rigid set of rules that must be followed to the letter. The truth is, it’s not till the business is up and running that you really know what works and what doesn’t. The ability to react flexibly to market demand is vital. The business strategy needs to be in a constant state of evolution.

Most important of all is to see the business from the eyes of your customers, and give them what they want, not what you want to give them. It sounds like a small distinction, but it is a change in mindset that can spell the difference between success and failure.

By Anwar Hossain

© 2018 Anwar Hossain - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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