The chances are you’re aware of the statistics. As many as four in every five startups fails to survive for the long term, which is a little concerning if you’re a budding entrepreneur setting up in business. Usually, only the very best young companies manage to put down solid foundations and make a real mark in their industry sector.
Yet the facts and figures can be a little misleading. The reality is that well-conceived, properly researched and suitably-financed companies have every chance of success. The problem is that many of the new startups established each year are none of these things – they are essentially set up on a whim without the necessary planning, preparation, dedicated management and support. Many of the these businesses stood little chance from the outset, a consequence of the mistakes made by their founder.
If you know how to go about setting up a business, and follow startup best practice, you company will naturally have a greater chance of survival. That’s not to say anything is guaranteed, as there’s never any way of predicting consumer trends, the state of the economy and other external factors. But if you go about things the right way, the odds will certainly be more in your favour.
How to increase your chances of success
As a startup founder, there are a number of things you can do to increase the prospects of your company being a success. First and foremost, you need to be realistic and practical at the outset, when you are dreaming up your idea. It is important to be objective, assessing how likely it is your enterprise will succeed. Extensive research should be carried out, in an attempt to establish the level of interest in your proposed products and services among your key demographic. If consumers are not overly-fussed by what your company has to offer, then it may be the case that you need a better idea – a stronger selling proposition.
The next thing to consider is whether you have the necessary resources to do your business idea justice. You need financial support in order to get the enterprise off the ground, whether this comes from your own bank account, through a traditional loan or through angel investment. All startups you’ll need a viable business plan, to ensure you spend money in the right way, at the right time, to maximise the chance of the business being successful. Strategic planning is all-important to any company and it isn’t something you can afford to overlook.
Skills and man-hours are another important consideration. Companies need to get the right people involved at the outset – those who have the required competencies, plus the energy and time to invest in the business. Some roles and tasks can be outsourced – such as the design on your website – but most of what happens within a startup will be the responsibility of the founders. If you don’t have the knowledge, skills and experience to develop a great product or service offering, what chance do you have of persuading customers to part with their money?
Efficiency is important to any new company, since it may be difficult to drive revenue during the early stages. Until your marketing activity takes hold and consumers start to buy, your cost base may be higher than your turnover. This means it is important to economise on things such as rent, utility bills, equipment and salaries, at least during the early stages.
Startups need to be agile and flexible. For example, you might have to start trading from a domestic premises, using ecommerce only, until the business starts earning money. Only then can you afford to commit to physical premises and open a shop or outlet.
Business founders have to be realistic but ambitious at the same time, knowing where they are trying to get to and how they will achieve these goals. This isn’t always easy. It’s important to remember that not everything can be done at once – there needs to a phased development which balances cost and revenue.
The value of startup programmes
External support can be crucial to startup success. A recent study conducted by communications company O2 indicated that startups which participate in more formal support programmes are more likely to survive than those that don’t. It highlighted the benefits of incubator and accelerator schemes, explaining that companies which graduate from such programmes are likely to secure greater financial investment – on average £68,000 more.
This can make a real difference to their prospects of not only surviving, but thriving too. O2 claimed that incubator and accelerator graduates receive support and guidance that gives them “an invaluable edge” over their competition. The firm said that 92 per cent of such companies are still operating after two years, compared to just 75.6 per cent for all small businesses.
It’s little surprise then that more startups have entered such programmes in recent times – a 110 per cent increase over the last three years. O2 noted that 59 schemes in the UK supported 1,100 startups during 2014. Entrepreneurs clearly recognise the value of external help and assistance, which can only be a good thing. It seems many are thinking carefully about how they can increase their chances of success, which bodes well for the future. Maybe in a few years time, startup survival rates will be much higher in the UK.