96% of UK SMEs are Micro-Businesses
Business advice for entrepreneurs, which can help micro-businesses succeed. A small business employing between 0-9 employees is classified as a micro-business. Most importantly, within the first 5 years, 60% fail. Therefore, expert and professional business advice is an important consideration. Maximum Solutions Consulting Ltd provides startup business consulting in and around London to facilitate success.
In early January 2018, the Department for Business, Energy & Industrial Strategy (BEIS) published their UK business statistics. In the private sector alone, Small & Medium sized Enterprises (SMEs) make up 60% of employment. In addition, they have a combined annual turnover of £2.0 trillion, which is a significant contribution to the UK economy. Certainly, startups and small businesses are vital to the economy.
This article explores success, together with some of the reasons why businesses fail. Most importantly, it provides some startup business advice for entrepreneurs to facilitate success. For instance, through highlighting some interesting research findings and statistics. Please note, the included research is subject to respective organisation’s criteria. It’s not intended to provide you with a 360-degree view of all the facts. For expert startup business consulting, contact Maximum Solutions Consulting Ltd.
What does success mean?
Success means different things to different people and over time, this can change. For example, is it about achieving strategic goals? For instance, improving turnover or increasing sales and profit. Alternatively, is it about product development or growth? Success can also be heavily influenced by social and economic factors. For example, Brexit and the need to adapt and change in order to survive. In addition, a financial or other environmental crisis that directly or indirectly affects business.
In addition, success may depend on the area of focus. For instance, a person’s personal or professional life. Certainly, the level of wealth can also influence what success means, as much as how it can facilitate financial success. For instance, to one person, financial success can vary so drastically and depend on culture, social, environmental and economic factors.
Watch this short video; ‘what does success mean and what does it mean to be successful?‘ and see what you think. A simple, but maybe outdated definition of success talks about an outcome being good or bad. Today, success is more commonly talked about in relation to accomplishing or achieving a goal.
Success & Startup Business Consulting
It’s easy to jump to a conclusion about what startup success looks like. For instance, would you define startup success by whether or not a startup survives? If so, what timeframe would you use and how would you measure success or failure? Did you create and manage a robust business plan and cash flow forecast to facilitate success? What about your business goals, were they Specific, Measurable, Achievable, Realistic and Time-Bound (SMART)?
With 60% of startups failing, it’s important to take into account expert business advice for entrepreneurs. Of course, success and failure are influenced by a number of factors. Startup business consulting research highlights that startups fail due to a number of reasons. For example, poor cash flow, management and/or poor planning. However, what this doesn’t necessarily look at, is whether or not a startup decides to cease trading or close for reasons other than those defined as failure. For instance, a personal decision to work for an employer or a lack of confidence/motivation to manage a business. A genuine desire to go back and work for an employer could also equal success. For instance, because it fulfils a motivational need, including the realisation and self-awareness of a better outcome from doing so.
Business Advice for Entrepreneurs
The number one piece of startup business advice for entrepreneurs relates to cash flow and planning. For instance, you need to create a robust cash flow forecast and business plan. This needs to take into account your short and long-term goals and risks. Certainly, you need to plan for the unexpected and have a backup plan. For example, if cash flow becomes an issue, will you go and work for an employer, seek crowdfunding or a loan? How will this affect your startup and what business advice do you need?
A great business idea needs to be supported by thorough research; market and competition. For instance, are you sure about the timing and location of your product or service? Has anyone else beaten you to it? What research do you have to support potential sales forecasts? In years 1-2, startups tend to struggle to breakeven, let alone to make a profit.
With startup business consulting services, you receive expert business advice to support success. This includes research and planning, as well as how to build an effective organisational structure, with efficient business processes. In addition, startup advice and coaching to support good management and communication. Watch this short YouTube video, which includes some tips to help startups to learn more.
Cash flow – Planning & Forecasting
Any new business has a certain degree of capital outlay, regardless of whether it’s for a product or service. This can vary significantly and depends on whether you start small. Equally, whether or not you need to hire resources and if so, at what stage.
Planning and cash flow go hand-in-hand. For instance, if you carefully plan your forecast and actual costs, you limit financial risk. That’s not to say unexpected costs can’t and don’t come up. For example, as a result of unforeseen challenges or problems.
It’s good practice to create at least a 12-month forecast. This needs to include your forecast sales revenue (if applicable in year 1) as well as committed costs. For example, already incurred actual costs, contracted suppliers and other known costs based on research into what you need. Watch this short YouTube video on how to ensure good cash flow.
Remember to incoporate business expenses (travel, accomodation, subsistence for client meetings etc.), rent, business rates (if you have an office space), IT infrastructure and support costs, advertising and marketing, office related (e.g. postage, stationery), office equipment (computer hardware and software), other supplier costs etc.
It’s important to research your competition before going ahead with your business idea. What is the competition and what are they already doing? What can you do differently to attract customers? How will you keep ahead of the competition to maintain revenue and increase profitability?
With every idea, it’s vital to carefully consider the timing of your startup. Avoid selling a product or service if the competition is very high in your chosen location(s). Is there room for anyone else in the market? If not, it could be a tough market to enter, let alone sustain. Equally, are you ahead of the game? Is the market ready for your idea? For example, think about Uber, Facebook, Instagram, YouTube etc.
Structure & Management
Then there’s management, which also links with planning and cash flow. Think about and plan how your business needs to be structured and managed. For example, the type of business entity (sole trader, partnership, limited company) and the associated pros and cons for each. For instance, a sole trader/partnership means all the financial risk rests with the individual(s). In contrast, with a limited company, the financial risk is limited to the business and its’ assets.
Consider whether or not you need a structured IT network and support. In addition, what business processes can help your startup be operationally fit and efficient? For example, how can you automate manual tasks, which mitigates risk, reduces waste and duplication?
Think about how will you juggle the financial, legal, marketing and sales + customer service side of things? What about delivering your product or service?
Hiring People & Leadership
The majority of startups don’t have the luxury of hiring a complete workforce. In fact, they tend to start out with just the owner(s). With this in mind, facilitate success by making your business efficient. Entrepreneurs need to prepare for the unexpected. Not only do you need to be ready for when trading commences, but also ramping up and future growth.
Once you’re ready and financially able to hire people, how will you structure and manage your team? Have you thought about job descriptions? Do you have suffcient management experience? Will your team feel motivated and appreciated? As the owner, you need to make rapid decisions, but good decisions. Fast decisions often lead to mistakes, but we can also learn from our mistakes. If you’re prepared, with a robust business plan and cash flow forecast, you’ll be more prepared to make better and faster hiring decisions.
Startup Business Consulting Statistics – CBInsights Analysis
In 2014, CBInsights polled 101 startups to see why they failed. Of those surveyed, 42% of small businesses failed because there wasn’t a market need for their products or services. This highlights poor planning, including inadequate market research.
In addition, the other reasons for startup failure included:
- 29% ran out of cash
- 23% because they didn’t have the right team in place to run their businesses properly
- 19% failed due to competition
- 18% because of pricing/cost issues
- 17% due to their product offering
- 17% because of their business model
- 14% because of poor marketing
- 14% because they ignored their customers
Whilst 101 startups is a small number, these are relatively common factors. It would be foolish not to prioritise planning, cash flow and research.
Startup Business Consulting Statistics – SME Challenges
In January 2018, Factworks surveyed 537 SMEs to understand the challenges they face. Most importantly, 79% of those surveyed said that ‘attracting customers’ was their biggest challenge. In the last 10 years, the way businesses market their products and services has changed considerably. Therefore, it’s not surprising to see this at the top of the list.
Attracting customers is one thing, but increasing revenue came in second, with 59% of those surveyed. Then, 51% stated maintaining profitability and 27% economic uncertainty. In 2019, this could increase because of Brexit uncertainty.
Business Advice for Entrepreneurs – The Impact of Digital Marketing
The impact of digital marketing, including social media is considerable. For instance, how startups reach their potential customers is a challenge in itself. If you’re not online, it’s a struggle to say the least. Even if you’re on social media, targeting the right people is another challenge. Further, consider ‘advertising overkill’ because more and more, consumers are being overwhelmed with sponsored adverts/posts. With this in mind, how effective is social media advertising? Which is best and what are the pros/cons for each? For instance, Facebook versus Instagram and Twitter versus LinkedIn. What is right for you and your business?
A new website takes time to gain domain authority (DA). Most importantly, DA is required in order to rank on Google and other search engines. The online world has been monopolised by Google and we are at the whim of search engine algorithms. This means your online visibility and ability to attract customers is already compromised. Without a domain authority and a good Search Engine Optimisation (SEO) and marketing strategy, how do startups succeed?
Startup Business Consulting Advice about Marketing
Consider digital marketing and SEO services very carefully before marketing your business. SEO also focuses on 2 areas; on and off page. Most importantly, you need to write blog posts and include a couple of key words or key phrases. There are specific rules you need to follow when writing a blog post in order for your key words or phrases to rank on Google. Plus, you need a good meta description and SEO Title. In addition, linking to and from other relevant website domains. This is known as a backlink strategy and takes time. Most importantly, you need to have quality backlines to avoid a negative effect on your domain authority.
It’s a mind field and one that links with your website domain name. Choose your domain name carefully. It’s all about key words, phrases and what your potential customers search for when they’re looking for products and services. Google’s algorithm and consequential ranking (points) system cannot be underestimated. Make sure you have a good SEO and marketing strategy in place. A key piece of startup business advice for entrepreneurs; research service providers with care and caution. SEO isn’t as complicated as some may lead you to think and you can just as easily do it yourself. Don’t get caught into a financial trap and minimum contract term of 6-12 months.
Starting a business requires a leap of faith and it isn’t for the faint hearted. It involves an unimaginable amount of hard work, stress and risk. Startups require time, bright entrepreneurs, who carefully research and plan their business idea. You need a solid cash flow forecast and a plan B, together with a good structure and effective management and leadership.