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Are UK businesses in a state of decline?

Whether it's Brexit uncertainty or lack of finance, the number of people starting a new business in the UK has slowed down.

According to the ONS, the amount of new businesses decreased for the first time in eight years in November 2018 - from 414,000 to 382,000.

Buried a little deeper in those figures is the fact 357,000 UK businesses went to the wall in 2016/17 - a 'business death' rate of 12.2% compared to 10.2% in the previous year.

Failure in itself is not a bad thing, it happens to all of us, but not learning the lessons when a business fails is.

Preventing business failure

It may sound pretty basic, but it's wise to avoid starting a business with no hope of survival in the first place.

Conduct thorough market research before you start a business to gain clarity on who your customers are and what they want.

For example, why open another coffee shop on or near a street with a Starbucks, Costa Coffee, or Cafe Nero?

Your business would have to be pretty unique to muscle in on such an already saturated market in the UK.

Even if you are an eternal optimist, you should think about the worst-case scenarios when writing your business plan.

Ask yourself what if your sales are 25% worse than anticipated? What if you need to replace a vital component? What if there's a fire that puts your premises out of action for six months?

Stay on top of cashflow

Business often cite poor cashflow as the main reason for failure.

Avoid burying your head in the sand if your business's bank account is overdrawn as you may not be able to pay your bills, and it's probably too late by that time.

Find the time for forecasts, planning and budgeting, and keep a close eye on your business's finances so you can react quickly when there's a cashflow issue.

Short-cycle planning can be more effective than getting bogged down in day-to-day or future planning.

Consider focusing on up to three key priorities and find clearly defined goals to make them happen, and consider an accountability partner to keep it on track.

For instance, your business needs to break-even before entertaining ways to grow and that should be one such priority for a startup.

Steps to tackle late payments

It's well documented that late payments continue to be the scourge of small business owners in the UK.

The Federation of Small Business (FSB) claims that the average UK business is owed £6,142 in late payments, often from larger companies.

‘Supply-chain bullying', as the FSB describes it, occurs because those much bigger companies have outrageously one-sided payment terms.

Try to ensure your payment terms are crystal clear, and consider embracing technology to make it easy for customers to pay up on time.

Fine line between success and failure

YouTube was an unknown dating site before its video streaming facility prompted a rethink, Apple was 90 days from going to the wall, and blackjack winnings reportedly saved FedEx from folding (excuse the pun).

Those examples, and there are many more like them, just show the small margins between success and failure - both in the UK and around the world.

The bottom line is some businesses are destined to fail, although on the flip side a startup that is never launched can never thrive.

Talk to us about your business idea.

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