For us, 2013 hasn’t just been about Margaret Thatcher’s death or the introduction of PAYE in real-time (RTI); it has also been about the success and growth of the UK start-up scene. Research conducted by Silicon Valley Bank at the end of last year revealed that UK start-ups are booming with 66% of respondents saying that conditions for business had become better since 2011 and a massive 83% of them expecting positive business conditions in 2013.
In addition to that, CEOs based in the UK say that the start-up scene is waiting to explode – this is supported by the fact that 87% of them said that they plan to hire new employees in 2013. But what’s important to remember is that most often start-ups go nowhere. Despite positive circumstances they fall short of reaching their full potential. Why would this happen when the climate seems so conducive? An indicator can be found in the same research; 89% of the respondents thought that struggling to find workers with the right skills needed to grow their business was a major hurdle towards growth and success.
But there are other obstacles to overcome if we want to cultivate and grow the start-up ecosystem in the UK.
Securing finance is one of the toughest challenges unless you can demonstrate the quality of your business plan.
But banks are no longer the only players in town. Companies such as borro.com, MarketInvoice, New Anglia Capital, Funding Portal and Funding Circle have opened alternative channels to raise funds. But you don’t have to enter the fundraising scenario alone; if you decide you want more advanced assistance – and something more personal – you may want to hire a professional like an accountant or certified financial planner to provide financial advice for small businesses. These professionals can offer a financial roadmap for raising capital based on your business goals. A good accountant will not only give you a second opinion, but also identify regulatory requirements and tell you whether there are better ways to fund your particular business.
Managing cash flow
It doesn’t matter whether you are a start-up or a multimillion-pound conglomerate, cash is king and managing your cash flow is crucial to your business’s growth. It might seem the least glamorous aspect of running a start-up or small business; nevertheless, it is a fundamental part of business management and can easily make the difference between success and failure. Managed poorly, it will stunt business growth, and in extreme cases can lead to bankruptcy.
However, managing your cash flow is not rocket science, it just requires a disciplined process of integrating day-to-day finance operations with the business plan, and ensuring there is enough cash to meet business needs. Clearly it’s sensible to take all the advice and planning you can at this stage – such as a professional accountant, someone who is accountable and can focus on the minor details. Of course, it will cost money when resources are tight, but if you don’t get the cash part of your business right, it will cost you a much more further down the line.
Lack of proper mentoring
Ask an entrepreneur why 2 out of 5 start-ups fail and you will evoke a variety of answers. While most of them would cite lack of finance, a strategic plan or even patience, we think the root cause lies in business owners not understanding the importance of proper guidance and support. In our personal lives we invariably have a circle of people we call upon for support and advice. Similarly, in business we need a trusted group of advisors who can provide us with the skills, advice and support we need to tackle the challenges of today’s fast-paced world. But often we are not sure where to go to get that support.
Big business plans and ideas need mentors at every stage and there is ample evidence provided by FSB which says that 70% of small businesses that receive mentoring survive for 5 years of more; which is double the rate of those that don’t. In addition to this 20% of mentored businesses are more likely to experience growth. This alone should motivate business owners to find a mentor who will not only invest time in learning about their business, their goals and financial challenges but also relay strategic advice to help them get on the road to success. Accountants for start-ups can help you get to where you want to be.