Take the Start-up health check

Published 27th of January 2017

Last week I gave a talk to a breakfast networking meeting of start-up firms - the complimentary bacon sandwiches and coffee sounded a good trade-off for an hour of my time with a great bunch of enthusiastic people!

But even without the lure of a free breakfast it was great to have a chat with them - I have a passion about start-ups, and, believe me...I've been there!

The statistics..

I've worried for many years over the startling failure statisitics for start-ups. There are 500,000 new start-ups every year - all that hope and money, families affected, etc. - but the reality is that between 50 - 90% of start-ups fail (depending on moveable statistics such as status, period being reviewed, etc). And less than 0.1% of the ones that make it ever get to 10 or more staff*. Even then, they’re often reliant on a leg-up from a benevolent sister/parent firm or business partner!

The cards seem stacked against success, and yet it seems accepted that that’s the way it is and and always will be. Why is that?

The start-up conspiracy

Why are the 'be cautious' alarm bells for the people putting their lives and futures on the line not ringing more loudly? It's not in the interest of banks to be ringing those alarm bells too loudly - they want/need to keep on with their (secured!) lending to start-ups.

It won’t bethe myriad of supplier organisations - advisory, property, consulting, office furniture etc. - who need their slice of ‘the start-up and close-down cake’!

So who should be ringing these alarm bells to warn Start-ups of the many sink holes they can fall into? In the absense of any one organisation, Start-ups doing their homework and taking a serious reality check will be doing themselves a big favour.

Why start-ups fail..

There are lots of reasons why start-ups fail: inadequate products, little or no market analysis, dodgy finances and poor management, to name just a few.

But it often boils down to one thing – their failure to get enough customers on board before the money, or motivation, runs out.

The breakfast session threw up some ideas that I wanted to share with you. Obviously, I can't cover all the reasons for failure and all the mitigate them in this blog, but here is some advice that my breakfast companions found useful:

How to give start-ups a fighting chance

  • Get business insights and data for your market place, products and services, potential customers - and competitors.
  • Know the risks
If you saw a consultant for an operation, they would give you the odds of your op succeeding, the side-effects, the recovery-rate and an opinion of whether it's worth doing. The same applies in many ways to Start-ups. So here are some further statistics which may start ringing those alarm bells. The most recently available statistics show that:
    • The five sectors with the highest failure rate are:
      1. Finance & Insurance
      2. Accommodation and food services
      3. Retail
      4. Professional, Scientific & Technical
      5. Transport & Storage
    • The five sectors with the lowest failure rates are:
      1. Health
      2. Property
      3. Motor Trade
      4. Arts, Entertainment & Recreation
      5. Education
    • The five areas of the country with the worst failure rates are:
      1. London
      2. North West
      3. North East
      4. Yorkshire & Humber
      5. Scotland
    • The five areas of the country with the best survival rates are:
      1. Northern Ireland
      2. South West
      3. South East
      4. East of England
      5. East Midlands/West Midlands/Wales

Keep in touch with the market place

Despite all the other distractions, central to everything is connecting with the market place - at least one day a week. Don’t fall into the "We are not quite ready group" - one of the biggest culprits for lack of action.

Start-ups need regular interaction to help them learn and pivot to meet customer needs.

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Check you've got a viable business

Depending on what products/services you are offering, pinpoint 10 - 20 small/medium or large organisations, locally or nationally, that are potential clients.

If you can't find these, give up now - you haven't got a viable business!

Make connections

  • Find a group of contacts (10+ ideally) in each of your target areas. It doesn’t have to be the obvious user of your products or services.
  • Contact ALL of them - try emails and 'old fashioned' letters - nobody else does the latter much these days. Yours will be the only one on the desk!
  • Call up after a few days - tell the gatekeeper your call is expected!
  • If the first three actions don’t do anything, repeat the process! Learn from the feedback....... or the lack of it!

* AlertBI is the UK's most innovative provider of B2B company data and business insights www.alertbi.co.uk