Many countries’ economies rely heavily on small enterprises. In the United Kingdom, for example, SMEs employ over 16 million people and are the primary source of work opportunities for citizens. Furthermore, SMEs make significant contributions to technical innovation as well as the development of new products and services. 

They bring in billions of pounds for the UK economy. SMEs presently contribute more than £200 billion to the British economy, according to the Center for Economics and Business Research and Hampshire Trust Bank. Surprisingly, the number is expected to reach £241 billion by 2015. 

Every year, millions of new businesses open their doors. Unfortunately, only a small proportion of businesses survive beyond the first five years. According to Forbes, 80 percent of new businesses fail during the first 18 months of operation. Do you intend to start or have you just started a small business? You’re probably wondering why there’s such a high failure rate. The following are five reasons why 95 percent of enterprises fail during the first five years: 

Poor management 

Almost all company publications blame weak management for the alarming numbers. A significant proportion of new company founders have no prior business experience. As a result, they find it difficult to manage a variety of areas such as finance, human resource management, purchasing, manufacturing, and selling. As a result, as a small business owner, you should think about collaborating closely with an expert. 

This will assist you in avoiding making rash judgments that may easily sink your new business. The professional will also walk you through the whole process, from strategy to implementation. 

Insufficient operating capital 

Many small firms operate with little financial resources. In reality, many companies open their doors with little idea of how much money they would need for day-to-day operations. Some businesses either fail to manage their cash flow properly or establish unrealistic revenue goals.  

If you want to establish your own business, you need think about how much it will cost to get started and how much it will cost to continue in business. This is significant since not all new businesses produce revenues within the first year. Let us help you in low-cost accounting solution if you want to access to real time cash flow statement.

Strategic planning 

Many successful businesspeople will tell you that preparation and hard effort are crucial for a new startup’s growth and progress. However, many small businesses fail owing to flaws in their strategies.  

Others make no plans at all. If you do not have a defined plan, you will most likely become overwhelmed with day-to-day company demands, losing sight of the broader picture. To avoid this blunder, you must first develop a detailed company strategy. It will not only function as a reference guide, but also as a tool for obtaining extra cash for the company. 

Poor business location 

A small business’s success is dependent on its strategic placement. A poor site, on the other hand, may destroy even the best-managed firm. Many firms fail because they are in unfavourable places for expansion. 

Before deciding on a specific site for your new business, consider a variety of issues such as target market accessibility, traffic, parking space, and safety. You should also look at the location of your direct rivals. 

Lack of business diversification 

Many small business owners make the mistake of relying solely on one source of revenue. Your company will collapse if the single source of earnings is insufficient to meet operational demands. Diversification is the answer to this problem. Choose to have several revenue streams for the venture. 

Do you need expert guidance on how to expand your small business? FBS Accountants is here to help. Our seasoned business professionals will help you from the beginning. We will assist you in developing a strategic business strategy as well as providing consulting, accounting, bookkeeping, and taxes services. Contact us right now if you want to join the ranks of our satisfied customers. 

For more information about how FBS Accountants can help your business, get in contact with us today call: 0204 526 5195 or drop us a line hello@finchleybusiness.co.uk