EOW Reflections: Business Startups

900,000 companies were started in 2023, up 12% on 2022. That’s a record according to research from NatWest and Beauhurst.

That’s a sign or resilience and confidence if ever there was one. Online retailers, property businesses and street food stalls are leading the way with Northern Ireland out in front followed by London and Scotland. Women are beating records too with 164,000 companies incorporated by women in 2023, up 4 per cent on 2022.

NatWest’s head of business banking James Holian said. “The report shows that despite the recent economic challenges, entrepreneurial spirit in the country has not just endured, it has thrived.

Entrepreneurial spirit has always been abundant in the UK. MPs constantly hail small businesses as the lifeblood of our economy. They account for half of employment (60% if medium sized businesses are included in the calculation) and about half of the private sector’s turnover. Clearly they are hugely valuable and we need to nurture them. However that means thinking hard about what they need in order to thrive. And as we heard this week that the UK is in recession thriving may take even more effort.

I’ve been talking to a lot of small businesses this week, mostly small online sellers and sadly they aren’t all going to succeed, mostly because of cashflow problems. A fifth of businesses fail in their first year and three fifths go bust within their first three years. Cashflow is generally called out as the culprit and it is key, but what causes a cashflow crises? The conversations got me reflecting on the times I’ve been part of the statistics.

Sometimes I had no real plan other than providing a great service and getting paid for it. But without the planning, revising, reviewing, repeat, repeat, repeat and the processes to back it up, I didn’t always have the what or the how nailed down well enough. I often got trapped in the weeds and when I needed to step back and listen to what the business was telling me. It’s no good having terrific ideas that no one wants to buy (even if you are ahead of the curve).  I spent a lot of time trying to ‘sell’ small business programmes to broadcasters when they only wanted to know about the big corporates.

I’ve never been good at ‘selling’. But I learned the hard way that cutting back on the marketing means customers don’t know about you. Having one big customer is great, for as long as it lasts but when they can no longer buy from you, or pay you, you’re stuffed. Market, diversify and invest in growing the business across more customers. But the risk then is that takes away from the time you have to serve the customers you’ve got.

Are people paying you? Are they paying you on time as per your agreement? Are they paying you too slowly because they’ve offered to pay you in 90 days when you really need paid in 30? If you don’t get paid you’re not running a business and will face the cashflow problems which will cause you to fail. The lack of good cashflow management, good payment and contractual negotiation, can cause serious cashflow problems.

If the answer is to hire someone don’t go for a clone of you. You need is people who can do all the things you can’t. The best thing I ever did was find a mentor: someone to challenge me and make sure I had a clear vision/goal for the business, a strategy to achieve it and to keep me focused on making it happen. I’ve thought I needed money when what I really needed was support from the right person for the stage of my business, who could help me get investment ready. How I wish I’d known then what I know now.