The global financial crisis of 2007-2008 was dubbed the ‘worst economic disaster since the Great Depression’. The aftermath still affects many organisations to this day. In addition, the impact of the Brexit vote in 2016 made a significant impact on the UK economy over a short period of time. These economic pressures impacted startup generation and stress on all growing businesses.
This prompted insolvency firm Mackenzie Goldberg Johnson, also known as MGJL, to investigate whether today’s growing businesses would be able to survive a similar economic crisis.The results revealed some shocking findings.
Half of the UK’s businesses say they do not have enough physical assets to support themselves during a financial crisis
When startups and small business owners were asked if they would have enough physical assets to support them during tough financial times, almost half (48.73%) stated that they would not. Delving deeper into these results also revealed that 35% of these businesses were in service-based industries such as business consultancy, technology and IT.
This is a worrying statistic as it suggests that startups and smaller organisations will be hit the hardest during times of financial hardships. They are left vulnerable to closure. Further evidence to support this comes from The Telegraph, as they reveal that half of the UK’s startup businesses don’t survive beyond five years.
This suggests that not only is the UK failing to incentivise and nurture small business growth, it also highlights that many organisations are struggling to create long term business strategies. Lack of a clear strategy unintentionally imposes barriers to growth over time. Economic pressures take their toll.
What are the key barriers to business growth?
Tough economic conditions present barriers beyond the organisations’ control that prevent small businesses from thriving and growing. Other key barriers to growth to be mindful of, include the lack of:
- A business strategy
- The right staff
- Financial support
- Brand awareness
- Economies of scale
These are just a few of the obstacles that businesses face on the road to business growth; in reality there are challenges around every corner. However, with the right support, businesses can turn these challenges into opportunities, giving them the skills to make it through tough financial times.
Overcoming barriers to growth
Surpassing the five year struggle will take significant planning to overcome the barriers to growth highlighted above. Here are our top tips:
Create a long term business strategy
Having a clear plan for your business’ trajectory is a key part of sustaining growth. If everyone in the organisation is aware of your shared long-term goal and how to achieve it, you’ll have better success with getting where you want to be. For more advice on long term business planning, click here.
Prepare for the worst
With the volatile in economic climate in the UK, you never know how the economy will impact your organisation. That’s why it’s important to protect yourself by preparing for the worst.
Preparation includes anything from building up emergency funds to creating a detailed cash-flow forecast. Planning ahead for difficult times will see your business in a favourable position should things take a turn for the worst.
Insolvency practitioner, Mike Gillard from MGJL, also offered his advice to small businesses on how to recover from financial difficulties:
“Businesses who find themselves with no physical assets and faced with liquidation shouldn’t need to worry. We have often worked closely with business accountants to help service-based businesses find a quick and easy solution when they find themselves with no physical assets to liquidate”
Whilst economic pressures do play a significant part in the growth and survival of startups, it’s important to recognise internal business problems that could be hindering business success. For more advice, visit our startup news page for more related articles.