When it comes to small businesses, especially in the UK, there are two arguments when it comes to the state of affairs. They are either a rip-roaring success, the perfect way for people to strike out on their own and relieve themselves of the shackles of working for a corporation where they will be undervalued, overworked and underpaid.
Alternatively, some have it that they are a surefire way to throw away your savings and future, due to long hours at a series of tasks you are woefully unprepared and qualified for in a vain attempt to save the sinking ship your business will inevitably become.
Of course, there is some truth in both these arguments, and for most people the reality is somewhere in between, but there are ways and means to try and achieve the former, while avoiding the latter. Let’s have a look at what the actual statistics are, in a little more detail.
Lies, damned lies and statistics
Every year, the Department for Business, Innovation and Skills releases very detailed figures showing the state of the employment landscape, particularly for SMEs, and these show not only the current facts and figures, but perhaps more importantly, the actual business trends.
Their latest set of data for 2015 shows that whatever people’s perceptions of the risks, setting up a small business in the UK has never been a more popular thing to do.
At the beginning of 2015, there were 5.4 million businesses in the private sector. This represents an increase of almost 150,000 from the previous 12 months, and an incredible 1.9 million increase from 2000.
Put another way, in the 12 months between January 2014 and January 2015 the number of new non-employing businesses increased by 112,000.
This compares with 35,000 which was the number of new employing businesses for the same time period. Both figures represent an approximate increase of 3 per cent.
So it’s certain that the businesses in question certainly start, but are they profitable? According to market researcher BDRC Continental, 80 per cent of SMEs interviewed in 2015 reported profits, a steady increase over time from the 69 per cent of 2013.
But there was a decline in average profit made by SMEs last year compared to 2014. Taking it globally for a second, there are an estimated 100 million start-ups launched every year, according to an infographic created by PokerStars.
Of those however only 500,000 will succeed. And there lies the difference in the stats. On the one hand it is easy to produce the figures saying how many SMEs there are, but it is the success of these businesses, how long they are surviving, how many are failing and why they are failing; they are the most crucial figures.
The same infographic sheds some light on that question. Your business has a less than one in 20 chance of being accepted for funding. Don’t forget that is worldwide, but it is alarming nonetheless.
There are many reasons however why a business does not get funding. Many, many of those 100 million start-ups will be based on business models and projections that just would not hold water.
They are doomed never to get off the ground because they have done no research, the wrong research, are trying to launch the wrong product or service at the wrong time or at the wrong place.
Or all of these. Even with that in mind, it is still alarming that 93 per cent of all businesses will eventually fail. Put another way, when setting off on your journey of creating your own business, you have a one in 200 chance of making a success of your venture.
Dealing with the reality
It is amazing to think that anyone in possession of these figures would go ahead and start their own company. Or is it? The type of person who starts a new business isn’t someone to be put off by stats. They feel safe in the knowledge that their venture will be different, better than all those that fail. They more than likely will have overcome hurdles and obstacles all their life, and are just as likely to be motivated not just by the bottom line, but also for the opportunity to change their way of life.
And this is a crucial point. Who defines success? For some people, it will be making a six figure salary. Others will see it as being able to retire ten years earlier than would otherwise be the case.
Still others would simply say that they have achieved everything they wished for simply by being able to keep their head above water financially while being able to spend more time at home with their family.
The fact remains though, that many small businesses do fail, and you need to know why they fail so you can take steps to avoid it. Unfortunately the same mentality that makes so many people start their businesses is the same one that ultimately makes them fail.
Single-mindedness, determination and great vision are all good attributes to have, but they can all too easily become narrow-mindedness, pig-headedness and blindness.
There is so much help to be had out there, a lot of it free. To not take that advice, or ignore it, is doing a massive disservice to yourself, your business and also to your employees.
Turning the odds in your favour
It is always good to take tips and advice from those who have been there and done it, and done it successfully. When starting a business, there will be times when we are a long way out of our comfort zone and areas of expertise.
This is only to be expected, and can be used as a positive experience. In these instances, it is good to have the safety blanket of being able to follow in the footsteps of those who have made the journey before. To be able to follow their examples, learn how they overcame setbacks and dealt with failures.
There is one set of people who are often ignored however when it comes to taking advice. Listen to any successful sportsman, from Premier League managers, to championship boxers and they will always say that they learn more from defeats than they do from their victories.
The same goes in business. One advantage of there being so many people who have failed at businesses is there is a large pool of people out there scratching their heads saying if only they had their time again, they’d do it differently.
More often than not they are more than happy to talk about their experiences, their mistakes, their missed opportunities and wrong decisions. Even the most successful businessmen have as many failures as successes throughout their careers (take Sir Richard Branson for instance) and you can be sure that they learnt from those mistakes and did not make them again. By listening to them, you have the chance to avoid making them in the first place.
We began with some statistics, so we will end with one. A positive one. Since the late 1970s, the rate at which businesses fail has declined by 30 per cent. Entrepreneurship is always going to be tricky, but getting it right is certainly worth it.