09-01-2008
It’s all bad news but small businesses should keep positive
by Rosie Beasley
According to a report by accountancy firm BDO Stoy Hayward, more businesses will fail in 2008 than in the previous 5 years, with small businesses and start-ups making up the majority.
Their predicted number of business failures for the coming year is 17,697 – a nine percent increase on last year. Which means that small and growing businesses will need to keep their wits about them as they enter the new year, ensuring that they have a plan in place to shield them from the effects of the credit crunch and any economic slowdown, to include alternative finance options such as factoring and watertight business insurance cover.
Most industries are expected to be affected. January is traditionally a tough time for independent retailers. If they have struggled over the usually busy Christmas period and not seen an increase in revenue, then rent day on 25th December can be the final straw.
Consumer spending is expected to slow down this year, with the threat of further interest rate increases forcing shoppers to tighten their belts and put more into savings or paying off credit cards. As a result it is predicted that around 1,382 retailers will go bust in 2008.
The closing of shops will lead to a flooding of empty retail space onto the market, adding to the space that commercial landlords are having difficulty letting. This is likely to push up rents, making it still more difficult for small businesses to survive.
Yet among all this doom and gloom there are small businesses which are thriving. So even if your business is just doing ok and you are worried about the future, try to think positive and don’t get de-motivated by all the negative economic predictions in the news.
Shay Shannon, Business Restructuring Partner at BDO Stoy Hayward LLP, said “British business faces a tough time next year with the number of business failures set to reach levels not seen for five years. Businesses in most sectors will need to prepare for a more challenging economic environment as the global credit crisis kicks in.
“It’s a pretty gloomy picture but the good news is that business failure rates are still a way off from reaching 2002 levels which saw almost 20,000 companies go bust. There are also glimmers of hope for industries such as retail predicted to be bolstered if the Bank of England slashes interest rates and the property sector which will be supported by the build up to the Olympics.
“To avoid becoming another business failure statistic in 2008, it’s important that companies feeling the pinch have contingency plans in place and take action early.”
Here are some ideas to help your business avoid becoming a statistic in 2008.
1. Don’t rely on a few big customers for your revenue, as if they hit their own troubles it could have a knock on effect. Put a sales plan in place that will allow you to diversify your customer base.
2. Review your finances. Make sure that any debt repayments aren’t suddenly going to increase, and that your cash flow is steady.
3. Consider alternative types of finance. For example, taking out a factoring facility for a year would ensure that you have a steady inflow of cash, enabling you to ride out any economic crises.
4. Speak to your landlord and ensure that the rent on your premises will be fixed for at least the next year.
5. Concentrate on building your business rather than on preventing it from failing. Get a sales drive going, and strengthen any areas of weakness with a view to increasing revenue.
More articles:
Commit your business to a greener future in 2008
Planning for success in 2008
Essential insurance for small businesses