Small and medium-sized businesses are the backbone of the UK economy. They account for 99% of all British businesses and are more varied than you could imagine.
But despite the huge number of small businesses out there, more than 5.8 million at the last count, life can be hard. They have to deal with all the challenges and problems faced by larger organisations but without the added security provided by scale. That can leave small businesses dangerously exposed to the fluctuations of the wider economy, increasing competition, cash flow risks, changing customer preferences and much more.
We are specialists in advising small businesses on how to avoid financial and other issues. If your small business is in difficulty, please do give us a call. We will almost certainly have helped a business in your sector and in your situation before. Our focus is on small businesses and our charges are affordable. The first consultation is always free.
How Many Small Businesses Fail?
It’s often said that half of all small businesses fail in their first year. However, the latest figures from the Office for National Statistics show that’s not necessarily the case.
In fact, of the 672,890 new businesses registered last year, that’s the equivalent of 70 new businesses every hour, 91% can still be operating in certain industries after the first year. However, fast-forward five years and just 40% will still be trading.
Small businesses fail for many reasons. Some just don’t pass the market test. There’s no way to shield small businesses from competitive forces, and given the constant cycle of innovation, risk-taking and creative destruction, it’s not surprising that many ventures fall.
However, many other businesses fail due to circumstances that could have been avoided if they had been identified early and properly managed.
Top Challenges for Small Business
(1) British Businesses are Wary of Brexit
According to a YouGov survey, 39% of small business owners think that exiting the EU will leave their business worse off, while just 10% believe they’ll be better off.
Entrepreneurs in London are the most likely to anticipate problems for their business post-Brexit. Nearly half (49%) think their businesses will be worse off.
The level of concern business owners have also varies depending on the sectors they operate in. 47% of small manufacturing businesses feel they’ll be worse post-Brexit, followed by 45% of retail and 42% of hospitality business owners.
(2) Business Cashflow is Still the Biggest Problem
Cashflow is a perennial concern for small business owners.
According to the recent Small Business Trends report from Guidant Financial, 33% of more than 2,700 respondents said that cashflow was a problem for their business. That’s despite the fact that 78% said their businesses were currently profitable.
No matter how profitable a business is or how many assets it has, without cash, there is no business. You will not be able to cover major recurring costs like rent and payroll, pay business tax, fulfil supplier invoices or purchase supplies and equipment to maintain your operations. Effectively, the business will be strangled.
(3) The Threat of Cyberattacks Continues to Grow
Cyberattacks occur every second, of every minute, of every hour, of every day, and, if you run a small or medium-sized business, you’re a prime target. According to the latest figures from the Federation of Small Businesses (FSB), small businesses in the UK are collectively subject to nearly 10,000 cyberattacks a day, with the cost of these attacks estimated at £4.5 billion a year.
(4) There’s a Growing Shortage of Business Talent
In many parts of the UK, business owners face an ongoing challenge to fill their skilled vacancies, and those talent shortages can have serious consequences.
The YouGov survey found that London is the only region where more small business owners said they found it easy to recruit skilled staff. Business owners in the Midlands, the East and Scotland found it nearly twice as challenging as those in London, while those in Yorkshire and the Humber found it the most difficult.
These recruitment challenges mean it can take months for some business owners to find suitable candidates, which can prevent small businesses from growing as quickly as they could. Businesses are left with little choice but to rely on contractors, who tend to be significantly more expensive.
There can also be a knock-on effect on staff retention, with workers able to chop and change positions regularly due to the high demand for their skills.
We can help with your Business challenges and concerns
At Company Debt, we work with the directors of small businesses to help overcome financial and related challenges. Whether it’s a cashflow shortage, HMRC tax problems, an inability to access finance or a business that’s struggling to grow, we can provide expert advice and assistance. Just get in touch for a no-obligation discussion of your circumstances.