The success of small business is vital to the global economy. Yet passign,and even money, often aren’t enough for a company to flourish, as evidenced by the large numbers that don’t survive. Figures reveal1 that nearly 60 per cent of UK small businesses close their doors within five years.
Entrepreneurs on the path to success are more likely to invest in technology, value time with their families and build excellent relationships with business mentors, according to the findings. A prior business failure, may even predict future success. Nearly six out of 10 respondents cited spending time with family in the evenings as crucial to their effectiveness as a business owner, and more than half said it’s important to keep their weekends free for loved ones.
“What small businesses learn from early failure can be a positive thing,” says Gary Turner, Managing Director of Xero UK. “Second time round, small business owners learned to keep costs to a minimum, limit overheads like rent and employees, and are more likely to develop robust business plans and take a more considered approach, limiting expansion before hitting profit targets. Businesses come back stronger the second time round.”
Success factors
● Sell services. Survivors appeared to have a better shot at survival if they focused on selling services rather than products. Fifty-nine per cent of businesses selling mostly services survived in comparison to 45 per cent of failed businesses, yet twice as many businesses that focused on selling products failed: 41% compared to only 19 per cent of survivors.
Xero’s findings strongly demonstrate a number of common traits demonstrating the mindset and habits of successful small business owners:
- They don’t work around the clock -instead they have a strong belief in the value of personal time and make time for their loved ones and family. While successful owners eschew sacrificing a personal life, for most of them it’s still impossible to disconnect entirely. Just 29 per cent say it’s vital to turn off their phones and laptops after business hours.
- They try, try and try again. A positive mindset and a willingness to fail—successful small business owners are more likely to see failure as a good thing, learn from mistakes and want to try again.
- They don’t pretend to have all the answers -instead they enlist the support of strong, collaborative network: family, advisors and mentors, an accountant or financial advisor. A third of successful entrepreneurs say they have turned to mentors, compared to just 14 per cent of respondents who ran businesses that had to close.
- They have the ability to access and manage finances. Of those owners who cited a business issue as a reason for failure (as opposed to a personal issue), most at 65 per cent blamed it on financial issues (cashflow, visibility, access to capital).
- They invest in technology for increased productivity in finance,along with dedicating funds to marketing and customer service. Nearly six in 10 survivors use software to manage their finances vs. a marginal 14 per cent of failures, and just shy of a third allocate resources to improving customer service, versus 20% of those in the failed camp.
