According to research conducted by the RSA insurance group, less than 50 per cent of small companies are surviving for five years or longer. The data indicated that just 45 per cent of small companies that had started in 2006 lasted to their fifth year.
The study revealed that if a company launched during the recession, it was even less likely to survive, with only 75 per cent of companies started in 2008 making it to the two year anniversary. The businesses that had started in 2006 were slightly more successful, with 80 per cent making it to their second year.
Figures from the study reveal how those set up in 2009 had a high chance of succeeding beyond their first year, with 90 per cent lasting to the 12-month mark, while in 2010 only 86 per cent were still in business beyond a year.
During 2013, economic growth was 1.9 per cent, encouraging medium and large-sized companies to invest in growth and start to hire again. However, there were fewer micro businesses starting up than previously. Small businesses are calling for support from the Government to help them grow, with bank lending at the top of the list. More small businesses would employ more staff if tax on employment was reduced, according to the study.
A number of experts believe that the bleak outlook for UK SMEs disguises a more positive outlook for the economy as a whole. The senior economist at the Centre for Economics and Business Research, Osman Ismail, says that some of those who started businesses during the downturn of the economy, following redundancy, may be returning to employment. Experts also believe that despite the results of the study, SMEs have always demonstrated resilience in the face of adversity.
Surviving the first year of business
Solid financial management is crucial during the first year and beyond. Poor financial control is one of the main reasons why a small business will fail during the first 12 months. If you don’t understand the company finances, outsource to an accountant so that you stay in control.
Produce a business plan that outlines the strategies for sales, marketing, staff, and your products or services. If you are likely to apply for finance, you will definitely require a business plan.
Enlist the help and advice of an accountant, who will help you decide the most suitable business structure, assist with HMRC compliance, plan finances and make substantial savings for the company.
If you have any tips for business survival, please let us know in the comments box below.
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We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!