Why Do Small Businesses Fail Analysing the Reasons for their High Rate of Failure in the UK

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The journey of innovation - be it of product or service - is long-drawn and requires perseverance. Very few take the courage to think through their ideas and give it the shape of a business. For the business to succeed, however, even good ideas need good backing - of finance, of marketing and much more.


Studies show that by the third year of starting up, at least half of them close down. While there are external factors such as inadequate funding that leads to this, part of the reason is also internal - such as the work culture, the marketing being poor, the location not being right, the product being ahead or behind its times, and so on. Therefore, for an entrepreneur to succeed, it is essential that they come with not only a product/service plan but also its business plan and a back up in case the first one does not work.
In the first place, there is a lot of concern that not many innovative ideas find the light of the day in the UK. According to a study commissioned by NESTA, an early stage investor in innovative and creative businesses, 80% of innovative ideas do not see the light of the day as knowledge of how to go about it, lack of funds and lack of time. However, the biggest concern was the fear of failure - what if the venture failed
According to a Cambridge University's Centre for Business Research study (Fielding2, 2006) based on three surveys of more than 1,000 SMEs conducted in 1991, 1997 and 2004, SME survival rates fell from 59% to 54% over the same period. Between 1991 and 1997, 28% of the companies in the survey failed; between 1997 and 2004, that proportion rose to 32%.
Among its more worrying findings, the research reveals a significant decline since 1997 in the proportion of SMEs c ...
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