The latest statistics issued for business survival rates by the Office of National Statistics (ONS) show that only 45% of UK businesses survive for 5 years or more and 40% of businesses actually cease trading within 3 years. Against this background of business failures, there is a big success story for SMEs, but it can get better…
99.9% of private sector businesses are SMEs, employing an estimated 14.4 million people, 59.3% of private sector employment. The combined annual turnover of £1.6 trillion for SMEs accounted for 48.1% of private sector turnover. The Department for Business Innovation & Skills (‘BIS’) estimates that at the start of 2013, UK private sector businesses with less than 50 employees numbered 4.9m. This was made up of 3.1m sole proprietors, 1.4m companies and 0.4m partnerships.
Despite there being more than twice as many sole proprietors as companies, BIS estimates that the total revenue generated by SMEs is concentrated amongst the 1.3m companies. Indeed, the companies generated £0.8 trillion in revenue.
The institute of Credit Management (ICM) have identified the top 10 common mistakes that small businesses often make and they include the basics: poor record keeping, insufficient cash, lack of attention to change (and risk), spending money on the wrong things.
Of all the many reasons for these failures, poor financial awareness is most crucial. The probability of business success improves significantly with sound financial management.