According to the US Department of Labour Statistics, 53% of start-ups stay in business longer than five years with only 20% surviving more than 20 years. In the UK the number of five-year survivors is slightly higher at 56%.
UK business owners told researchers their biggest challenges are the tax system (44%), lack of bank lending (38%), red tape (36%), costs of running a business (36%), and late payments and cash flow (35%).
These issues are serious. However a good business plan would warn new business owners of the first three problems, and dedicated record-keeping could prepare them for both late payments and cash flow. So the deeper issue causing many failures may be whether an entrepreneur is willing to set and then follow a realistic plan, and then do the necessary paper-work. Harsh. But losing money is harsher.
CB Insights in their blog offers a post-mortem of 232 start-up failures and reports the reactions of both founders and investors. This presents a catalogue of regret with much learning from mistakes along with some finger-waving, and maybe even a bit of anger leaking from the edges of their remarks. In contrast it also reveals - as a positive image of the negative - what start-ups can do to create success.
People who lead successful start-ups are disciplined and committed to making their plans reality. For example, if a supplier offers a big discount for a triple-size of their order, these entrepreneurs check their records, before saying yes, to see if they will have enough ready cash when the bill arrives. They also look for any other expenses falling due at the same time.
Viewing at the numbers can be a sobering experience. If they show there a lack of sufficient cash, then a triple order is not a good thing. In fact it could prove to be the event that drags the business under. Further, if production scheduling, storage, and potential sales raise a red flag, then these too mean no to any unplanned purchase. Some deals aren’t worth making.
However choosing to make a deal becomes much easier when owners know what they want. They need a vision and self-knowledge for why they started a business in the first instance. Their vision is their purpose. For example, an owner who wants to retire at 30 needs to make different commercial choices than someone who wants to grow a family business and pass this to the next generation.
These are two different visions, and start-up owners truly need to know what they want, and what drives them if they are going to make choices that serve their goals.
Vision and strategy are hot topics in the UK now with government funding available for workshops and training.
- Warwickshire Start Up - Business Vision & Strategy
- Government grants are available for start-ups. Visit this link.
- If you are a non-UK citizen wanting to start a business in Britain, then this link describes how the British government encourages this.