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The Will to Succeed: Why So Many Businesses Fail in their First Year

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If you’re going through Hell, Keep Going – Winston Churchill

By Tim T Dingle BSc (Hons) PGCE MBA
Chief Development Officer at the Academy of Vocational and Professional Training

In 2013, 62 per cent of all start-ups will fail within their first year of trading.

We have evidence to support this and yet we see that many people are now being forced into self employment as a result of the most intense financial economical downturn. Yes we are all going through economic hell in the United Kingdom at the moment; but  there is a need for us all to keep going.

This astonishing statistic, and one that becomes even worse in certain parts of the country. In parts of the UK business failure rates have reached almost 85 per cent.

Yet the truth is that half a million people per year set up new businesses.

They do so for a number of good reasons including

  • being in ‘control’,
  • ‘being their own boss’,
  • ‘getting a better work / life balance’
  • ‘freedom’.
  • only way to earn some money

Do any of these thoughts resonate with you? Most business owners work very long hours, for very little reward. Having met with many owners and business people I think that is universally true.  They often cannot afford ­or have not planned ­ to take on anyone else. In the United Kingdom, nearly 99 % of business is made up of SMEs (Small to Medium Enterprise with less than 250 people), amounting to almost 4 million SMEs. Of these, the staggering fact is that­ 97% of which have fewer than 20 people and 70% are one-person owner managed businesses.

AddThis Social Bookmarking Sharing Button WidgetBut here is the really stunning fact you may recognise; most of these business owners end up investing all their money (or family savings) and giving up the very reasons they started the business: freedom, work / life balance and control. Far be it from being in control, most businesses and business owners are in fact spinning out of control, being highly reactive rather than proactive, with no real goals, no clear vision and many being so time deficient that there is no time to think, let alone have time for a plan.

So why do so many business fail and so quickly?  Consider this quotation from Sidney A. Freidman (I have it over my desk),

“You can achieve anything you want in life if you have the courage to dream it, the intelligence to make a realistic plan, and the will to see that plan through to the end.”

The ‘courage to dream’ is essential and business owners have without question been courageous.

However that dream must be qualified by a very sound non-emotional understanding of money and finance.  From cash flow to paying too many people too much, most people start out in business without any idea of how much money is really required. They don’t then make a plan or even an intelligent business plan. Those brave souls who start their own business and take all those risks then fail as they give up far too quickly.  Any new business will be lucky to break even in their first year. Many people new to business often assume that they are going to make a fortune within 12 months. The truth is less than 80% of new start-ups make a profit in their first year. You need to have the will to see that plan through to the end.

jumpstartbusinessbootcampnotimetowastegewuk 3      Years ago you would have been looked up for having a ‘vision’. Now it is considered essential for business owners.  But having a vision is not enough.  Failure starts when the manager is incompetent. Most small businesses fail because the owner does not have the knowledge to run a business properly.

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Must business don’t get the importance branding; their own personal brand or their business brand. Every single piece of your company has to scream out your brand including your brochures, websites, delivery vans and the uniforms that you and your staff wear. Everything has to congruent.

I am continually surprised that most people that are afraaid to sell. This essential soft skill (which I teach and we have brilliant short online courses waiting for you) of how to close the sale is a MUST HAVE item. This is an art form that needs teaching. Some people are naturally good closers but others have to learn by reading and studying. The more you practice the better you will become. So make a note to self: learn how to sell!

One really crucial understanding for all employees and the owner is understanding what the true demand is and the companies own Unique Selling Point. Small businesses often overestimate the demand and usually have no unique selling proposition built in to their products.

Now here is the crucial point so often ignored by new business owners. You need the ability to get on with other people. A brilliant ‘soft skill’ that can be acquired. We all know that we have to treat our customers with respect but what about our suppliers? I am amazed that I have to explain to intelligent people that this is an essential of business success. If you do not pay your suppliers on time they will start quoting you higher prices. If you are rude to them they might stop doing business with you altogether. I like the Tony Robbins thought that,

‘The degree to which you manage your relationships is often the degree to which you will be successful’.

In my experience from commercial mediation (a sensible alternative to conflict) a huge proportion of a manager’s time is wasted on managing unwarranted conflict, misunderstanding and so on, that could amount  to over a full working day per week. ­So, could you be more productive if you used this ‘conflict time’ for ‘selling time’? Want more money?

jumpstartbusinessbootcampnotimetowastegewuk 7Finally, a large number of businesses fail because they are over-reliant on a very small number of clients. This is the hidden danger that lurks for all business owners. It takes just one unexpected closure to result in significant financial hardship. Short-term future earnings can be massively reduced, and invoices for completed work can go unpaid. While maintaining caution about spreading yourself too thin, try not to rely on a very small client base. If you deal with a very few clients, or if a small number make up most of your turnover, you must start finding and bringing in new clients and business. Right now.

A business needs a good business plan that covers all these issues and makes them part of a living, working document. If you want back control of your life and your business then write a plan and get help (with writing or implement it). Business failure can be quick and unexpected. Make sure that you are totally aware of the major risks facing your company and ensure that you are in the best possible position to avoid them.

Churchill was right. Make sure when you have the courage to dream that you make an intelligence to plan and have the will to keep going. If you’re going through hell, keep going.

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