99.9% of UK businesses in the UK are SMEs

How can startups succeed?  What causes startup businesses to fail?  This article provides some startup business advice for entrepreneurs.  In the private sector alone, small and medium-sized businesses (SMEs) make up 60% of employment.  SMEs 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.  Firstly, this article highlights some SME research and statistics.  Secondly, it explores success and some contributing factors.  Most importantly, it highlights some of the reasons why SMEs fail.  Above all, this article provides you with some startup business advice for entrepreneurs to facilitate success.

The Department for Business, Energy & Industrial Strategy (BEIS) UK business statistics:
(As of early 2018)

  • 5.7 millions businesses in the UK
  • 99.9% being SMEs
  • 96% being micro-businesses, employing 0-9 employees

Certainly, these figures are staggering.  Despite this, startups aren’t without their inherent risks and challenges.  Before exploring how startups succeed, what does ‘success’ mean to you?

What does success mean?

A somewhat outdated definition of ‘success’, refers to the outcome being either good or bad.  Nowadays, this is more commonly defined as accomplishing or achieving a goal.  If you’d like to watch a short video about ‘what does success mean and what does it mean to be successful?’, click here.

It’s easy to jump to conclusions about success.  For instance, is it defined by whether or not a startup survives?  What is the percentage rate of failure/success?  Within the first 5 years, 50% in fact.  This is staggering and highlights the need for startup business advice for enrepreneurs.  Of course, there are a number of factors that influence success or failure.

What this doesn’t necessarily look at, is whether or not a startup ceased trading or closed for reasons beyond those causing failure.  For instance, a personal decision to work for an employer.  Secondly, a lack of motivation or confidence in managing a business.  This doesn’t necessarily define failure.  It could be a genuine desire to go back to working for an organisation to fulfill other motivational needs.  Does that also equate to success?  i.e. because of the realisation and self-awareness of a better outcome?

In business, success means different things to different people and organisations.  For example, is it about achieving strategic goals?  For instance, improving turnover or increasing sales and profit.  Secondly, is it for product development or growth?  In addition, it could be due to social or economic factors.  For example, Brexit and the need to adapt or change to survive a financial crisis.

Some startup business advice for entrepreneurs about business failure

Every year, determined and hopeful entrepreneurs set up a new businesses.  Whilst the ratio of survival (50/50) is evenly split, the reasons behind both are crucial to understanding how startups succeed.  Most importantly, entrepreneurs need to consider risks.  As part of your research, identify the strengths, weaknesses, opportunities and threats (SWOT).  For example, what are the risks?  What is the likelihood and severity of these risks?  i.e. the possible impact to you and your business.  Above all, acknowledge that there are risks .  Further, make a plan to eliminate, reduce, improve or control each risk.

Attracting Customers

There are several reasons why startup businesses fail.  In January 2018, Factworks surveyed 537 SMEs to understand the challenges they face.  These challenges are success factors for you to consider.  Most imprtantly, 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, this isn’t suprising that it was top of the list.  For instance, digital marketing, social media (e.g. Twitter, Facebook, LinkedIn, Pinterest, Instagram etc.) and Search Engine Optimisation (SEO).

Revenue and Profit

Attracting customers is one thing, but increasing revenue came in as a close second with  59% of those surveyed.  Further, 51% stated that maintaining profitability was another challenge.  Without being able to effectively attract customers, how can startups succeed and increase revenue and profitability?

Interestingly, securing finance received 13%.  Whilst some may consider this low, it also isn’t that surprising.  This is because of the availability of funding and variety of options.  For example, crowdfunding and Angel Investors.  In particular, given the demand for Tech Startups and digital transformation.

27% noted economic uncertainty and in 2019, this figure is likely to have increased.  For example, with Brexit uncertainty and the continued delays in agreeing a deal and whether or not, the UK leaves without a deal.

The impact of Digital Marketing – Startup business bdvice for entrepreneurs

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 have the social media accounts, targeting the right people is a huge challenge.  Further, there’s the impact of ‘advertising overkill’.  Nowadays, as a conusmer, we are overwhelemed with constant sponsored adverts/posts. How effective is social media advertising?  Is it right for you and your business?

Even a new website takes time to accumulate domain authority.  You need this in order to rank on Google and oter search engines.  This means your online visibility and ability to attract customers is already compromised.  Further, the online world has been monopolised by Google and its’ search engine algorithms.  Without a domain authority and a sound SEO and marketing plan and strategy, how can your startup succeed?

SEO looks at on and off page requirements.  This includes keywords and keyphrases as well as relevant articles and blog posts.  During the first year, potential customers can’t even find startups via an online keyword search.  Not unless you pay for a Pay Per Click (PPC) campaign.  Then, it depends on your budget and certainly, which digital marketing provider you use.

It’s a mind field and one that links with your website domain name.   Choose your domain name carefully!  It’s all about keywords, phrases and what your potential customers search for when they’re looking for products and services online.  Google’s algorithm and consequential ranking (points) system cannot be underestimated.  Make sure you have a good SEO and marketing strategy.   My 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.

CBInsights Analysis on why startups fail and thus, how can startups succeed?

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.  For example, due to poor market research or planning.

  • 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

Factors that influence startup success and failure – Business advice for entrepreneurs

There are several reasons why startup businesses fail.  Firstly, entrepreneurs need to carefully research and plan their start-up.  For example, before bringing your idea to life, make sure you know your market.  The sad news is that so many entrepreneurs have great ideas, but often lack the business mindset and know-how to ensure stability, sustainability and scalability.  So, how can startups succeed?  It takes a lot time, hard work and careful planning.

In years 1-2, startups rarely make enough money to breakeven.  You might have a dream of making hundreds of thousands of pounds, but what’s your plan to get there?  That’s not to say that startups don’t breakeven or make a profit earlier.  Obviously, several do, but what was different for them?  Was it due to their idea, timing and location?  What about luck or shear hardwork?  My number one piece of startup business advice for entrepreneurs; reduce risks by completing thorough research and careful planning.  This needs to take into into account the short and long-term risks, including mitigation steps.  What’s your backup plan?

Cash flow – Planning and Forecasting

Another risk that entrepreneurs need to consider is cash flow.  Any new business has a certain degree of capital outlay, regardless of whether it is for a service or product.  This can vary significantly and depends on whether you start small.  Equally, whether you need resources from the beginning etc.

Planning and cash flow go hand-in-hand, since if you carefully plan your forecast and actual costs, you limit the financial risk.  That’s not to say that unexpected costs don’t come up.  For example, unforeseen challenges and problems.  It’s good practice to create at least a 12-month forecast.  For instance, of your forecast revenue (if applicable in year 1) as well as committed costs.  This could be your known contracted and actual costs to date.  In addition, any other costs you’re aware of from your research and planning.


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.  You will want to avoid selling a product or service if the competition is very high.  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?  Think of the likes of Uber, Facebook, Instagram, YouTube etc.

Structure & Management

Then there’s management, which also links with planning and cash flow.  Entrepreneurs need to think about and plan how their 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 with each of these.  Being 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 system in place.  What business processes can help your start-up be operationally fit and efficient?  How can you automate manual tasks, which mitigates risk, reduces waste and duplication (including things like manual workarounds, unnecessary process steps etc.)?  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, startups can facilitate their success and survival through establishing efficient and effective business operations.  Entrepreneurs need to prepare for the unexpected.  Be ready for when business begins to ramp up and future growth.

Once you’re ready and financially able to hire people, do you have the management experience to ensure your workforce are motivated?  Will your team feel appreciated and have job satisfaction?  Have you thought about job description?  How will you structure and manage your team?  As the owner, you need to be able to make the best decisions possible and often very quickly.  Fast decisions can often lead to mistakes, but as entrepreneurs, we learn from the mistakes we make.  If you’re prepared, with a robus plan that includes detailed cash flow forecasts, you will be more prepared to make better and faster decisions.

Closing thoughts

In part, starting a business requires a leap of faith.  It’s not for the faint hearted.  This is because it not only involves an unimaginable amount of hard work, but plenty of risk too.  Startups require time, bright entrepreneurs, who carefully research and plan their business ideas.  This needs to be done before you go ahead and put the idea into action.  You need the cash flow and management/leadership experience to match.  For entrepreneurs that have great ideas, but lack the planning and leadership, there are resources out there to help you succeed.  With some specialist, professional, expert business advice and or business coaching, you can put your startup firmly on the road to success.  Click here to learn more about services provided through Maximum Solutions Consulting Ltd.