How can an SME avoid busi­ness fail­ure? Some use­ful tips to guide you.

In Brief

Two recent sur­veys of SME busi­ness own­ers and their advis­ers revealed some key rea­sons why busi­ness­es fail.

Rea­sons for failure

Accord­ing to a CCH sur­vey, SME own­ers believe that most busi­ness fail­ures are a result of poor cost man­age­ment, whilst many of their advis­ers believe that fail­ure is often due to a poor­ly-designed busi­ness mod­el. Both agree that inex­pe­ri­enced man­age­ment is a key fac­tor, but a sig­nif­i­cant num­ber of SME own­ers also believe that some busi­ness fail­ures are unavoid­able as the caus­es are out of their control.

The sur­vey also con­firmed that an SME’s accoun­tant is its most trust­ed advis­er for the con­tin­ued suc­cess and growth of its busi­ness. Finan­cial advis­ers are also high­ly regarded.

A recent PwC Report high­light­ed that the key to busi­ness suc­cess is care­ful plan­ning and for­mu­lat­ing a long term busi­ness plan. This demon­strates that the ini­tial empha­sis should be on how the SME is formed and man­aged to pro­vide the SME with the great­est abil­i­ty to cap­i­talise on its busi­ness plan.

The results of both the CCH Sur­vey and the PwC Report cor­re­spond with our expe­ri­ences with SMEs.

Poor­ly designed busi­ness mod­els and inad­e­quate pro­tec­tion of assets, such as tech­nol­o­gy and intel­lec­tu­al prop­er­ty, can severe­ly impede the suc­cess of a busi­ness by erod­ing its margins.

If these issues are not addressed at an ear­ly stage, this often results in addi­tion­al expen­di­ture required to restruc­ture the busi­ness or trans­fer assets to oth­er enti­ties, which are eas­i­ly pre­ventable with advanced planning.

Use­ful tips for busi­ness success

Both the CCH Sur­vey and PwC Report empha­sise that invest­ing in your busi­ness ear­ly by seek­ing the right advice from expe­ri­enced pro­fes­sion­als will ulti­mate­ly save costs and ensure that you can focus on real­is­ing the true poten­tial of your business.

As a start­ing point, you should check whether your busi­ness is struc­tured to max­imise tax ben­e­fits and to pro­vide for an ulti­mate exit. You should also check that you can iden­ti­fy and pro­tect your tech­nol­o­gy and intel­lec­tu­al prop­er­ty, and take advan­tage of gen­er­ous research and devel­op­ment grants which are cur­rent­ly available.