In today’s competitive business environment, simply having a great idea for a business no longer guarantees you success. The UK is clearly coming out of the economic slump that began back in 2008, and this is backed up by figures released by Companies House that reveal a record-breaking 581,173 new businesses were registered in the UK during 2014. However caution still has to be exercised here as, according to the Daily Telegraph, over half of all UK start-ups fail within five years. That figure is made even more sobering when Theo Paphitis, quoted in the Guardian newspaper, states that the 50% failure rate occurs within 2 years.
While it might be easy to blame the recession for more recent business failures, in truth that is not the main reason start-up businesses fail. The main reason, and the same reason most businesses in general fail is cash-flow, or rather a lack of it. Cash-flow is different to income or profitability as it relates to the actual availability of money to maintain the health of a business. Irrespective of when a business may receive payment for goods or services that have been ‘sold’, suppliers of goods and services to your business are not going to wait. If you can’t pay your bills, irrespective of however much money you have ‘coming in’, then your business will eventually cease trading.
Now for all start-ups, a thorough business plan is essential. As the well-known expression goes, fail to plan, plan to fail, and that is so true in business today. Of course with your business idea and model, you may well have worked out your profit and loss figures, made projections and forecasts, but before you let the horse run away with the cart, you have to accurately work out how much it is going to cost you to actually set up your business.
This can vary considerably depending on the nature of the business you have in mind. A painter and decorator will not require the same equipment or stock as an online store or mobile hairdresser. However the principles of setting up a new business are the same and below you will find the most common costs involved in setting up a business.