Reviewed: 28th October 2013
“My business is in trouble with debt spiraling out of control and I simply don't have enough cash to make payments on time. I've read that most small business startups have problems similar to mine, but why?”
This concern is common amongst the directors, managers, and owners of small business startups in the UK, and for good reason – about 2/3 of startups fail within their first 3 years of operation. Usually the failure is brought about by a number of factors that work together synergistically to make business progression difficult. Here are the 4 most common reasons why small business startups don't do well:
Starting a successful startup is all about planning – analysing your market conditions and competition. Some of the things you'll need to know and have planned for:
Operating a startup all by yourself can be a recipe for disaster. Things happen that we don't expect, and when there's absolutely no one else to fall back on it can be easier to become stuck in predicaments that result in missed deadlines and unsatisfied clients.
At the very least you should have a professional accountant on call and/or a general helper to assist with medial duties so that you can focus on the business. At the same time, hiring too many employees prematurely can drain your cash flow and hinder your company's ability to invest and progress.
Most startup founders are a bit overzealous and as such have a tendency to overestimate their funding needs. The prospect of getting a £50,000 business loan definitely sounds tempting, but realistically you don't even know if your company is going to be profitable yet.
Borrow only what you need to get started, and never borrow more than you'll be able to pay back in the event that the business fails. If you've recently realised that you have too many debt obligations, you may want to consider debt consolidation or a company voluntary arrangement (CVA) as potential solutions.
Unless you've actually set up and managed a business before, there's no way to know how it feels to deal with such pressure and responsibility on an ongoing basis. When you think about it, the entire endeavour is a learning process, as essentially everything you do is a new experience. For this reason there's a much higher chance of making mistakes that could lead to the failure of the company in the long-term.
If you feel as though you won't be able to recover from the current debt situation but you'd like to salvage some of the company's assets before it is dissolved, you may want to contact an insolvency practitioner (IP) to arrange a pre-pack administration sale.
If your startup is not doing as well as you had planned there are still many recovery options that could put you in the 1/3 of those that succeed. Give us a call on 0800 644 6080 or send us an email and tell us about your situation. We're trained and certified in business rescue so there's no problem that we can't help fix. With 75 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK.
22nd July 2019
Pub businesses have been closing at a rate of 40 per month over the course of this year, according to the latest figures on the subject.Read More
18th July 2019
The UK economy is likely to be plunged into recession in the aftermath of a No Deal Brexit, according to the Office for Budget Responsibility (OBR).Read More