These days, big enterprises dominate the commercial headlines in the UK. However, most of the actual work done in the economy is carried out by small businesses. In fact, the statistics done by the Department for Business Innovation and Skills show that almost 6 out of 10 Brits work for firms that have fewer than 250 employees. If combined, the number of people employed by SMBs equal to around 23.9 million people – that’s roughly 59.1 per cent of private sector employment.
Although small and micro-businesses dominate the scene, a big portion of them end in insolvency or are in need of external administration. According to Barclays Small Business Survey, the success rate for startups in the first half of 2004 was about 57%. The current state of the economy and the growing situation in Europe has further reduced this rate.
Experts suggest that, regardless of the industry, certain elements have contributed to the success of many startups and small businesses. Before going into the details, it is necessary to note what causes most to fail.
Why do small businesses fail?
While there are no clear-cut statistics that show the reasons why businesses fail, a number of factors have contributed to business failure, such as:
- Cash flow issues. Many startups struggle to manage their cash flow. Monitoring of cash outflow, such as buying computer supplies, and inflows from operations and financing is essential in avoiding insolvency.
- Ignoring new technologies and new developments. The internet has provided many small businesses with an opportunity to level the marketing field. Access to a wider audience and lower costs helped many startups expand their businesses. Business machines have also made many processes easier and more efficient.
- Lack of clear objectives. Goals are essential for any organisation to succeed. Without them, strategies will have no clear focus or direction.
- Lack of finance. Insufficient funds can hinder growth or limit the expansion opportunities for many startups. Compromising, such as opting for a cheap substitute of high-quality ink and toners, can affect the quality of products and services.
- Poor business planning. At the start of any business, a detailed business plan is always necessary. It needs to cover finance, marketing, sales and promotional plans as well as breakdowns of costs and profit predictions.
- Poor choice of location. Your business address is another factor that can affect your success. A good location can help you attract the right customers and improve your brand.
- Poor human resource relations. Motivated employees are behind every successful company. By providing your staff with a steady office supplies and ensuring a safe working environment, you will be rewarded with hard work and loyalty.
- Poor management. Aside from a motivated staff, you also need strong and experienced managers. They need to know and understand your customer’s needs as well as instruct and encourage your employee
- Poor marketing. With more marketing channels, protecting your company brand can be more difficult, so it is essential to develop a marketing strategy early on.
Essential elements to success
Understanding the factors that can contribute to failure is only one part of the equation. It is also important to consider the factors that can lead to your success, including:
Strategy
As stated, a detailed business plan highlighting the goals and strategies of the company is essential for any business to succeed. Even a single page document that is thought out and well executed is better than nothing at all.
A well-made plan defines the goals of the company and drives the activities of the entire organisation through detailed strategies. It should include a financial plan, product strategy and marketing differentiators.
Company Culture
Office culture is considered as the integrated pattern of behaviour, knowledge, and belief within the organisation. Successful companies know that retaining employees is more than just providing comfortable office furniture and giving monetary benefits. Culture can attract and retain highly motivated and knowledgeable individuals in the organisation. By ensuring a safe and productive office environment, you can foster creative and loyal employees.
Financial roadmap
Your financial plan is the cornerstone of your business plan. It should set the proper guidelines in terms of where and how you can spend your money. It should also provide you with ways to measure your progress or shortfalls.
In addition, your cash flow should be monitored properly. Take note of any outflow, including purchasing business machine or furniture, and inflow from your operations or financing to avoid accounting issues.
Technology
Finally, technology has brought many positive changes in the business world. Computers, for instance, have made business processes more efficient and accurate, while the internet has levelled the playing field by introducing new ways for small businesses to market their products and services to a wider audience.
These days, you don’t even have to do manage your technologies yourself. Outsourcing companies, like Bronxis, offer software services to help you expand your marketing reach online.