Recent data collected indicates than 2016 is the year of the entrepreneur as an average of 80 new businesses have been set up every hour since the turn of the year with more than 300,000 people setting up their own companies.
A recent report conducted by StartUp Britain, a national enterprise campaign that is government-backed has revealed that since the turn of the year an incredible 386,874 new businesses have been registered with Companies House. To put this number into perspective, 2015 saw a grand total of 608,110 for the year, if this pace continues, the UK could be looking at total of more than 700,000 new businesses this year.
On another positive note, insolvency data from January to March indicates that fewer companies have gone bust with just 3,694 companies entering insolvency, this figure is 3.6% lower than during the same time frame in 2015. Whilst this is great news for new businesses, there is still a huge worry of failure for many start-ups out there. Last September, a report commissioned by the Chartered Management Institute (CMI) published the results that of new companies set up in 2011, 44 % had failed by 2014. Since the report, 14% more have followed the same path and the results are similar for businesses set up in 2012 and 2013.
What encouragement then, in this uncertain post-Brexit economy, can budding entrepreneurs take forward and what mistakes should they avoid in order to succeed? Forbes magazine recently revealed the top 20 reasons why many start-ups eventually fail, the top 3 are as follows:
1- No Market Need – 42%
2- Run out of Cash – 29%
3- Not the Right Team – 23%
In order to avoid the most common problem in having ‘no market need’ for your product, there is no hard and fast answer is to this as it depends on how novel your product is. If you are entering into business with an existing product or service then research is your key, research into the market, your prospective clients and your competitors. For newer products you can of course investigate similar products or at least the industry into which you are entering but as former ICI chairman John Harvey-Jones put it:
“People are unlikely to know that they need a product which does not exist and the basis of market research in new and innovative products is limited in this regard.”
Regarding running out of cash, a spokesperson for Flair4IT puts much of this down to “poor decision making” when it comes to outsourcing or hiring staff for each part of the business. It is reported that just 2/5 budding entrepreneurs have experience in either business, technology or finance. With almost every business now being computerized or having an online presence, IT support is something that no business can do without. Unfortunately an in-house team is a cost that many can ill afford. Outsourcing your IT needs is a far easier and better way to cut your costs, leaving you to focus on growing your customer base.
The same sentiment goes for financial management, those with no prior history of account management should seek help outside, despite the additional cost David Skok suggests that hiring experts can help avoid “inevitable start-up collapse”. Aside from these areas, start-ups should consider carefully what they outsource, based on cost, potential time saved and the overall benefit to the business.
Regarding the hiring of the right team, this will naturally differ slightly from business to business but the core requirements remain the same. Maynard Brusman of San Francisco consulting firm Working Resources suggests that “Social intelligence — being able to navigate social situations and work well with others — is very important,” he also went on to advise that “What kind of person you hire depends on the culture of organization and the kind of job…a great person with all kinds of skills may be a good fit for one and a poor fit for another, simply based on their personality type.”
When it comes to hiring the right team, you should hire people by matching them well to the job and use a mixture of common sense, gut feeling and most importantly, once hired, don’t be scared to admit that you hired the wrong person or else it could prove fatal for your business.