By: Andrew Bunn, start-up specialist for the Sheffield City Region
Entrepreneurs are an optimistic bunch. They often seize opportunities where others see adversity and in many cases, back their instincts and gamble it all in the hope of success. We’re all familiar with some of those people who have made their fortune and built multi-million pound businesses with little more than an idea and a computer sitting in their bedroom, but the reality of entrepreneurship is often very different.
According to data published the Office for National Statistics, 20% of all new businesses will fail in their first year and 60% will have ceased trading within three years, and it’s worth remembering that those statistics were published before the beginning of the Covid-19 pandemic.
In my job as a start-up business adviser, hardly a day goes by when I don’t have the privilege of helping to support new entrepreneurs as they take the first tentative steps on their business journey. Starting a business can be challenging, exciting and rewarding. It takes determination, resilience and the ability to adapt and evolve to succeed. So why do just so many new businesses fail?
There is often not one, but several reasons why businesses fail, but for most it often boils down to three key factors: Finance, Planning and lack of knowledge.
The number one reason why businesses fail is that they simply run out of money, for others it is because they’ve not thought through many different elements of how their business will operate. To the uninitiated starting a business can be a potential minefield, so what steps can you take to reduce the risk of your dream business becoming a failure statistic?
Here are three key things to consider:
- Do your research: make a plan
Never make assumptions about anything and question everything. An entrepreneur’s first few years should be a constant quest for questions and pursuit of answers. You should be in constant contact with your target market, do you really understand their needs and requirements? Ask yourself are you confident you know how your industry operates? Having a good understanding of your sector will help highlight any possible pitfalls before disaster strikes. Speaking to experienced individuals who understand what you’re attempting to achieve will also help.
Putting together a business plan will help you to think about many different elements of how your company will operate. Well thought out business plans will enable you to look at your business holistically and consider finance, marketing, staff and future plans. Business plans should be treated as a working document, full of achievable milestones so you know you’re on the right path and I recommend reviewing and adjusting your plans regularly as your business evolves.
Don’t just think about your business, but also others delivering similar goods and services. Research your competitors and evaluate how your planned products or services compare.
As your business moves from being an idea to a reality, your business plan can be invaluable to monitoring its performance. Stay focussed and concentrate on building solid foundations.
- Keep an iron grip on your finances
When launching a business consider the amount of money you need to sustain your lifestyle, for example, mortgage payments, food, bills . This is called your personal survival budget and the minimum amount of money you need to earn each month.
Think about how you intend to fund your business. Most new businesses need a healthy level of capital to purchase equipment, raw materials and bring their goods and services to market. Whether this is achieved via a business loan, private funding, or savings, it can be easy to get carried away.
Sometimes it can be more beneficial to consider alternatives, for example hiring equipment rather than purchasing outright, or scouring the internet for second hand bargains instead of purchasing brand new. Try and keep your spending to a minimum and remember, it can take time to receive your first sales so it’s important to make every penny in your business count.
- Ask for help
It is almost impossible for anyone to start a successful business without a helping hand from people who have been there, seen it and done it. Some new business owners can feel guilty and a sense of failure if they don’t know all the answers.
Many local authorities across the UK provide access to free business support, such as the Launchpad programme which is based here in the Sheffield City Region.
The Launchpad Programme offers free one-to-one business advice and a wide range of online workshops to help entrepreneurs realise their innovative aspirations. For more information follow, https://scrlaunchpad.co.uk/ There are similar programmes delivered in many other areas of the UK, if you unsure what help and support is available on your doorstep, I would recommend contacting your local authority in the first instance.
It can also be helpful to consult member organisations such as the Federation of Small Business and your local chamber of commerce – both organisations provide a wealth useful resources for new entrepreneurs.
Notes to Editors
Andrew Bunn is a specialist start up advisor for the Sheffield City Region Launchpad Programme. Andrew has helped many new start-up businesses across the region overcome a variety of hurdles, to help reduce the number of failed start-up businesses.
The Launchpad is a funded programme, designed to increase the business stock in the Sheffield City Region (SCR) through the provision of prestart, start up and post start up support. Since the programme began in April 2016 it has helped around 7,000 individuals and businesses and delivered more than 70,000 hours of support.
The programme targets economic growth through initiatives that develop entrepreneurial mind-sets and skills to promote self-employment as a career option. Launchpad equips individuals with the entrepreneurial knowledge, technical skills and competencies required to establish and run successful businesses, through the delivery of training, mentoring and business support.
Launchpad is delivered by a consortium led by Barnsley Metropolitan Borough Council (BMBC) with delivery partners – Sheffield City Council, Rotherham Metropolitan Borough Council, Doncaster Metropolitan Borough Council, Bassetlaw District Council, and The Prince’s Trust. Funding is provided by each delivery partner and the European Regional Development Fund (ERDF)
The European Regional Development Fund
Launchpad is receiving up to £2,073,681 of funding from the England European Regional Development Fund as part of the European Structural and Investment Funds Growth Programme 2014-2020. The Ministry of Housing, Communities and Local Government (and in London the intermediate body Greater London Authority) is the Managing Authority for European Regional Development Fund. Established by the European Union, the European Regional Development Fund helps local areas stimulate their economic development by investing in projects which will support innovation, businesses, create jobs and local community regenerations. For more information visit https://www.gov.uk/european-growth-funding.