Q&A: What do you think the key factors are for small business failure in the UK?

I believe that many factors contribute to small business failure. Indeed I believe that business failure is part of eventually becoming successful in business. The key for me is to make sure you don’t lose everything when the business fails. So bootstrapping is absolute essential, don’t spend money you do not have, don’t borrow from banks, make sure you don’t get into trouble with taxes, hire a good small business accountant, learn cash-flow forecasting and with that try and understand your business dynamics.But to give you a more straight forward answer, running out of money is the ultimate problem why business fails, reasons for this are:

1. lack of cash-flow planning;
2. no sales or not enough sales;
3. too high overheads and not cost control;
4. loss of business focus;
5. red-tape;
6. lack of marketing;
7. bad customer care.

Bootstrapping, sales oriented and customer focused small business has, in my opinion, the best chance of survival. ST.        

6 Responses to “ Q&A: What do you think the key factors are for small business failure in the UK? ”

1. Jim Lee
   
   Said on January 23rd, 2008 at 4:24 am

   I believe the biggest cause of small business failure is not following a proven business plan, and instead they try to “re-invent the wheel”… especially when it comes to sales and marketing.

   The other factor is that many unsuccessful business owners waste their time with “busy” but non-vital tasks. There’s a great article about this here:
   http://www.jamesbrausch.com/the-right-action-vs-distraction/

   Yes, the other items you mentioned are important… but there are plenty of highly profitable companies with poor customer care, too much red tape, poor customer care, etc.

   Cheers,
   Jim

2. Stefan Töpfer
   
   Said on January 23rd, 2008 at 9:26 am

   Hi Jim,

   Thank you for your comment. You will find that many companies have been “reinventing” the wheel and been very successful, in-fact that is what made them successful, i.e. IKEA with their value co-production sales and marketing action.

   As far as time wasting is concerned I agree with you, business focus is essential to any business success.

   The fact that there are plenty of highly profitable companies, with for instance bad customer service, does not mean they are not loosing customers. With my focus on micro business, it is imperative to get customer service right since it is often the main differentiator to bigger and/or cheaper competition.

   Best, Stefan

3. Jim Lee
   
   Said on January 23rd, 2008 at 3:34 pm

   Hi Stefan,

   You’re absolutely right that there are many successful companies who reinvented the wheel… But it’s often much harder to do, than simply following a proven path. That said, you also can’t just be a “me too” company… you must bring some unique value to the table.

   And no question, bad customer service will hurt you and make you lose customers… I guess the big companies can sometimes “afford” to compensate for that with a huge marketing budget.

   Thanks for your good points.

   Cheers,
   Jim

4. Andrew Ivey
   
   Said on January 25th, 2008 at 4:04 pm

   There are entrepreneurs who see business failure as part of normal business experience – but when it involves us it’s painful. I reckon that an over commitment to fixed costs (property and plant) and poor use of cash (inventory stocking etc) are as much to blame as weak marketing.

5. Ann White
   
   Said on January 31st, 2008 at 2:58 am

   Following a proven path, and learning by doing is a better way than trying to figure out how to reinvent the wheel. I get a lot of encouragment both entrepreneurial and spiritual from James Braush. Many startups don’t have the experience or general knowledge that is needed to understand the concepts you are talking about. It’s easy to say that such folks should not go into business, but how else can we take control?

6. Stefan Töpfer
   
   Said on January 31st, 2008 at 9:39 am

   Hi Ann,

   Thank you for your post. I’m a little alarmed that you feel I’m advocating not to go into business for yourself, nothing is further from my mind.

   The concepts I’m talking about are tools to survive better and not in any way academic. I hope my blog is easy to read and understand. Please, if I did not make my points clear let me know and I will rectify this situation.

   Best, Stefan

Leave a Reply

I would love to hear from you, please let me know what your take on my blog post is. In order to stop spam on my blog and increase conversations, I had to implement some simple rules:

1. Please enter your real name, not your company, product or service's name.
2. If you enter your URL, your name will become a link to the URL.
3. We may send you a confirmation email to check you are a real person

We are sorry but any violation of the above rules will mean an automatic removal of your comment.