Why do most small business fail in the last year?

There have been a record breaking number of small business startups over the last 2 years, yet the statistics show that in the first year 20% will fail and 60% will to out of business in their first 3 years of trading.

Rushing into a new business can be exciting, but there are many factors to consider when making such a big financial committent.

Doing the necessary groundwork before starting a business will not only lead to longevity but will increase annual turnover.

Putting a business idea into practice is not as easy as it seems, there are many factors to consider when going it alone, knowledge or expertise in your field won’t in itself lead to a thriving business.

Knowing your customer, understanding the market, keeping control of the finances and being aware of your competitors are a few things that need attention but here are four key areas that will define your success or failure in the first year of trading.

Many entrepreneurs under estimate the importance of Business Planning and why keeping within the boundaries of a business plan provides advantages such as keeping focused, keeping finances under control and remaining on the right track.

Without proper business planning business owners will face many challenges which lead to risky decisions

Prior to setting up a business, a certain degree of market research needs to be carried out such as understanding your customer, know your competitors, recognizing the risks, marketing options, technology that could help the business.

The business plan is for a 12 month period and ideally reviewed annually to keep on top of the business goals and objectives.

Selling products and services and running a successful business require different skill sets. Hiring the right people and managing staff can be challenging for those without the necessary skills or experience.

Creating a strong management team will help a business grow strong and capable of adapting to change. Good management also creates a strong and loyal staff base who grow with the company and become invaluable.

Understanding of basic business concepts such as business strategy, focusing on a niche market, budgeting, customer service are all key areas of a business that need attention.

In the first year it is easy to overspend on building the website, advertising, recruitment and purchasing all the technical equipment you need. There will be companies out there eager to help you so prioritising what is necessary and what can wait is important.

Cashflow problems can soon escalate with expensive start up costs and overheads, but the unexpected problems can come from non payment and late payments of from customers that needs to be managed.

Understanding your market, getting the pricing right and advertising in the right places at the right price can all feel very over whelming for those entering self employment due to expertise in a chosen field.