Company Formation and Business Survival 2007-2016

Starting-up a business is no easy task. Regardless of the idea or industry, it entails a lot of risk and uncertainty. There are a ton of aspects to consider from finance to logistics. It can therefore be an intimidating mind field, especially if you have little knowledge or experience of what is entailed. Yet many fail to realise this and fall into the pitfalls of chasing short-term gains and establishing unrealistic objectives.

Our research

Interested in company formation and failure, Turnerlittle.com scrapped data from Company House to discover how many companies went into liquidation or administration or had a proposal to strike off (the removal of a company’s name from the official ‘Company House’ register) in the same year they were incorporated. An incorporated company is one that has been set up and registered with Company House. Turner Little, assessed data for the time period of 2007-2016.

The research revealed prior to the infamous financial crash which caused turbulence and calamity throughout the world, in 2007, 108,413 companies were incorporated. Out of those companies – 3,537 went into liquidation, 2,115 had a proposal to strike off and 324 in administration within the same year of being set up.

In the aftermath of the financial crisis, in 2009, 102,848 companies were incorporated. Out of those companies – 3,447 went into liquidation, 2,628 had a proposal to strike off and 112 in administration within the same year of being set up.

From 2010, the number of companies incorporated increased year on year. Interestingly, 2012 had 190,720 companies incorporated, but saw the highest number of companies go into administration within the same year in the time period from 2010 to 2016. Moreover, with 346,981 companies incorporated, 2015 saw the highest number of them go into liquidation within the same year in the time scale from 2010 to 2016.

With regards to the latest year included in the research, 2016, 422,480 companies were incorporated – the highest number out of all the years included. Out of those companies – 3,152 went into liquidation, 23,648 had a proposal to strike off and 75 in administration within the same year of starting their respective enterprise.

Providing an overall picture, between 2007-2016, a total of 39,674 companies went in liquidation the same year they were incorporated. Also between 2007-2016, a total of 1,401 companies went into administration within the same year they were incorporated.

How to increase survival rate in first year of business

Business Plan

Creating a business plan should not be an activity taken lightly. A business plan will act as a blueprint for any business, clearly providing a strategic vision for each aspect of the entailed operations. Not thoroughly doing this can be detrimental, as it will not provide a structure as to what needs to be done and how. It’s also a very important document for raising capital through investors and banks.

Costs/Expenses

One of the biggest reasons why businesses fail in their first year is because they run out of money. This is either through splashing money carelessly or over allocating excessive amounts to aspects of the business that don’t necessarily need it. Money needs to be prudently managed – only hire people that are needed, don’t acquire an office space which is more than the required space/room and research all options before committing to any financial spend to get the best deal.

Objectives

Having objectives allows the businesses to channel its resources and processes towards a clearly defined path. When this is not in place, the business will not have a solid foundation thus over spend and miss allocate resources towards worthless processes and activities.

Customers

Any business that truly wants to succeed needs to understand that their customers are the focal stakeholders that drive revenue and growth. Consequently, it’s imperative that businesses make every effort to understand their consumer segments by actively understanding what they want and what their expectations are. This either be through primary or secondary research, from either avenue it’s important to acknowledge what factors can drive their attention to your brand and how that can evolve overtime.

Guidance

With so many platforms available online to connect with seasoned professionals, harness their expertise by connecting with them. A lot of them are happy to be contacted and offer constructive solutions to solve a business’s prospective problems and dilemmas. They could also provide an alternative way of thinking or a perspective which would have never been considered/thought-off/suggested.