Why are small business survival rates so low?

There are more than five million small businesses in the UK yet only 60% of start-ups survive to reach their third birthday.

In disadvantaged areas the figure is higher, while microbusinesses with fewer than five staff that are unable to grow also struggle.

Driving growth with the use of innovative products and ideas becomes essential, as without it many small businesses stagnate and are ultimately forced into closure.

Long-term sustainability is the goal for any new start-up and there are a range of refinancing and alternative finance options available to help boost growth.

However, such finance can only serve as a short term fix if a business fails to take advantage of any opportunities that present themselves.

At the same time, many small businesses report that they struggle to access finance, although peer-to-peer lending and asset finance are growing in popularity.

Investors may also consider companies as a potential option but for may opt out if their business propositions are unviable, or not well thought-out – a lack of awareness among small business owners is one potential reason for this.

Of SME businesses in the UK, 96% have fewer than nine staff, so management is therefore essential as business owners need to ensure they remain on top of their finances to ensure they recruit responsibly and at the right times.

Other reasons for business failure can see SMEs get into difficulties when it comes to servicing time to pay HMRC in terms of tax and other liabilities.

Should firms find themselves in a position where they are unable to pay their bills, they should seek financial guidance or contact an insolvency practitioner to explore possible courses of action.

Clear plans for investment in business development, sales and marketing can often hold the key to success, as it means an owner is aware of what is required in order to drive growth.

However, greater awareness of the costs of upscaling and more avenues of support relating to sustainable growth are required to boost current business survival rates.

By Phil Smith

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