Early-stage companies advised to be frugal 

Start-ups need to be more aware of cash flow management and 'burning through resources too quickly', advises the Institute of Chartered Accountants in England and Wales.

With start-up rates at a high point, many entrepreneurs find the reality of running a business different to their perceptions.

Entrepreneurs were asked about the perceptions between starting out in business versus the reality and what they would have done differently.

A third of entrepreneurs say not agreeing a common vision was a mistake they most wished they had avoided when starting up.

Not managing cash flow (20 per cent) and not getting business advice sooner (15 per cent) are also popular choices.

Three quarters say running a business is more challenging than they expected, and not getting enough customers (28 per cent) and not making enough money (28 per cent) caused the most fear for those starting out in business.

Finance professionals, who work with start-ups, however cited that using up existing resources too quickly (25 per cent) as the biggest fear – an issue not even mentioned by new businesses.

Those advising small businesses rate cash flow management as the biggest challenges when starting up (23 per cent) but entrepreneurs place this lower (16 per cent), behind sales and marketing.

Stephen Ibbotson, ICAEW director of business says, ‘The desire to create a successful start-up in the UK is still very high and continues to grow. Entrepreneurs’ perceptions of what they think will be the challenges they face as a start-up and the reality they actually encounter are very different.

‘These false assumptions can often lead to businesses not fulfilling their maximum potential and at worse, failing completely.’

The majority of entrepreneurs underestimate the challenges of starting-up a business (70 per cent) and 68 per cent believe getting an experienced business adviser is useful.

Asked if they had experienced any challenges related to starting a business that surprised them, 40 per cent of entrepreneurs say no. This compares to 90 per cent of finance professionals who say that there is a gap between the type of challenges start-ups assume they will face and the reality.

Further reading on cash flow

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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