Business Start-ups…why do so many fail?

Colin Willman
Chairman, FSB (Member Services) Ltd
FSB Member Services
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In 2012, according to, more than 400,000 new businesses were set up which sounds encouraging given the current state of the UK economy. However 20per cent of those new businesses failed within the first year and 50 per cent won’t be around by 2015. To add further context; by 2015 212,081 businesses will have gone under.  So why are the number of failing businesses so high? 

Now the current economic situation obviously makes things more ‘challenging’ but are there any other reasons why UK entrepreneurs fail to get their ventures off the ground? I think there are five key factors blocking business success:

1. A Flawed Business Plan
As they say fail to prepare, prepare to fail. All new businesses require a well thought out, researched business plan that is realistic and based on accurate, current information and educated projections for the future. Entrepreneurs need to think of a number of different logistics and issues such as SMART goals for the business, well researched financial plans, raising capital, balance sheets and cash flow forecasts. All of these are fundamentally important as they provide a structure in the early stages for the business.

2. Poor Management
When starting new ventures, managers need to be multi-skilled and capable in numerous aspects of the business as they are in charge of all the operations taking place. For someone inexperienced it can be a disaster and the business can soon begin to fail. A good manager needs to be able encourage productivity, delegate effectively and is a strategic thinker who is able to look at the ‘bigger picture’ for the business.

3. A Lack of Business Visibility
Visibility is incredibly important for a new business. A business needs to be able to position itself in the mind of its potential customers and stakeholders. According to Bain & Company’s ‘Putting Social Media to Work’ report, more than 60% of internet connected individuals now use social media platforms every day, spending 22% of their time on social media websites. This is a huge audience and relatively cost-effective to reach meaning small businesses are able to spread key messages and increase brand awareness effectively. New business start-ups need a well-designed, accessible website together with a well-researched and planned social media strategy to successfully promote the business in order to build a loyal customer base.

4. Know Your Competition
When entering a new market place businesses need to be aware of who they are competing against. There will naturally be well established businesses already in the area and start-ups need to find inventive and creative ways to grab customers’ attention yet also build trust and loyalty to establish a long term relationship. It’s important for new businesses to be able to communicate unique selling points to attract people away from the competition.

5. The ‘Red Tape’
The Sun newspaper has recently begun a campaign titled, ‘Cut the Red Tape’. It believes that government legislation, VAT and tax regulations and strict employment rules all hinder new businesses and that the UK government doesn’t offer enough support to help small businesses in the early stages of their start up.

Bureaucracy and red tape can be very damming resulting in the delay of opening, financially cost and stop a business from even opening. The Sun’s campaign aims to reduce the amount of red tape that businesses face because they are offering opportunities in local communities that will improve the local economy.


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30th Jan 2016 11:08

Mostly it is a wrong choice of business, product brand or even a company name itself. Business name should always the priority when putting up the business, it must be unique trademarked and registered under your brand ownership then with unique idea of marketing afterwards. Try this, how it helps many kickstarters grows their chosen businesses. Also get a chance to meet Alexandra Watkins, she is a branding expert.

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