According to the Federation of Small Businesses, there were 5.8 million small businesses in the UK at the start of 2019, with SMEs accounting for 99.9% of the business population.
Unfortunately, not all start-ups and SMEs succeed. Interestingly, London has the lowest rate of start-up survival in the UK, with just over 50% of companies that were formed in 2013 making it past the three-year mark (Enterprise Research Centre).
The reason? Well, there are several of them, starting with the three common challenges below:
CHALLENGE #1: Inadequate business planning
So many start-ups and SMEs think they’ve carried out the necessary planning, but you’ll be surprised at how much of the planning and preparation falls short. This could be because little time’s been invested in developing the plan and researching the market, or because the ideas simply aren’t realistic.
Solution: Never skimp on the planning phase and make sure you have a clear, solid business plan in place. Where possible, seek expert advice and guidance to shape it and don’t leave any stone uncovered, i.e. tick off all of the areas, including business vision and objectives, marketing strategy, workforce and financial requirements, competitor and budget analysis and any potential risks/complications.
CHALLENGE #2: Poor time management
In the very early days, most start-ups and SMEs start off with just one person, usually the business owner, doing everything – from the pitching for new business and executing the work to the admin. Only having one brain and one pair of hands to do things with can be incredibly stressful, especially if the business does well from day one. Like all business professionals, start-up and SME owners only have a certain amount of hours in the day to get things done.
Solution: Don’t be afraid to delegate the tasks that make sense to delegate. I.e. not the tasks that your business is built upon, but the work that can be outsourced without impacting quality or outputs and won’t eat too much into your profits either. For instance, diary management or invoice chasing.
CHALLENGE #3: Lack of funding
It’s not uncommon for new business owners to lack a proper understanding of their cash flow and have a limited grasp on how much capital they need beyond the initial start-up costs. It’s also extremely common for start-ups and SMEs to miscalculate their projected profit too, which can quickly lead to financial issues.
Solution: Estimate the funds you’ll need for a minimum of one or two years in advance and use the external support that’s available to you, i.e. businesses start-up calculators. And if you’re a high-growth ‘disruptive’ business that’s ready to expand now, make sure you take advantage of the funding that’s out there that’ll enable it to happen.
We’re currently looking to work with and invest in SMEs with ambitious growth plans. If you’re looking for funding to support you in taking your business to the next level, visit https://midven.co.uk/funds/midlands-engine-investment-fund/