10 reasons businesses fail!

1. 10 ReasonsBusinesses Fail!
Phil Mitchell
Director ofHarbourKey Limited
June 2017

2. The stats……….
 32% of businesses fail dueto poor management of financial activities.
 Small business survival rates havebeen as high as 91% after one year of trading……..but after five years
just four in ten small businesses will still betrading.
 Not just SMEs – What happenedtoWoolworths andJessops etc.

3. Failingto track your finances
 Learn/pay strict attention toyour finances.
 Making decisions basedon insufficient or NOfinancial information isnot going tohelp you
understand your business.
Action:
 Usefrom an earlystage afinancial management software package,so you have timely, meaningful
andrelevant information.

4. Inadequate Business Plan
Action:
 Preparea business plan:-
 Forces you to think about the future andthe challenges you’ll face;
 Makes you consider your financial needs, your marketing andmanagement plans, your
competition and your overallstrategy;
 Can bereviewed regularly and used asa measure.

5. Not understandingyour pricing structureand margin
 How much are you making on sales/service?
 Pricing has upto four times more impact on profitability than other improvements.
Action:
 Review & checkpricing regularly:-
 All pricesmust covercosts andprofits;
 Themost effective way to lower pricesis to lower costs;
 Get an understanding of what customers will pay;
 Not allbusiness isgood business.

6. Poor Cashflow
 CashifKing – Life Bloodof theBusiness.
 Action:-
 Invoice promptly;
 Make surethe invoicedetailsare correct;
 Understandwhatyouneedto do to getpaid;
 Know yourcustomer;
 Paymentterms& conditions;
 Latepaymentinterest;
 Chaseand escalate.

7. Lackof reserves
 In simple terms –Nosavings for unexpected increases in the costs of items like utilities, materials,
labour and tax!
Action:-
 Operatea separate bank account as a savings account.;
 Havediscipline toput a % away each month.

8. Lack of or in appropriate credit
 Nocredit– Not good!
 Thewrong typeof credit– Not good!
 But creditis nota badthing.
Action:-
 Shop around for credit.

9. Not managing tax
 Taxman always last tobepaid!
 HM Revenue &Customs is the biggest creditor in business insolvencies in the UK.
Action:-
 Manageyour taxes, they arenot optional!
 If going to struggle topayspeak to HMRCat the earliest
opportunity;
 Maximise benefit of tax reliefs such as capitalallowances and
research &development.

10. Failureto submit/filetax returnson time
 Lateaccounts/tax returns =penalties (waste of money).
 Risk of investigations.
 HMRCwill notconsider time to payarrangements.
Action:-
 Fileyour returns on time;
 Taxinvestigations fees insurance.

11. Poor process and procedures
 Poor controls & processes lead toproblems, not only in finance
 Goodprocesses means fewer errors & delays
 Increased costs & poor use of resources
Action:-
 Usemodern technology;
 Review regularly, as you grow processes need tochange &adaptand
 Communicate the changes and check they are being followed.

12. Not taking advice
Action:-
 Appoint a good accountant/adviser;
 Take the opportunity toget free advice and
 Network totalk about your business.

13. Other non financial reasons:
 Failure tounderstand costs, markets and keycustomers;
 Allowing customers unnecessary discounts/too many loss leaders;
 Growing too fast - growth isdesirable, but over expansion is a serious error;
 Poor choiceof location: - avoidcheap leasetemptation;
 Poor customer service, employeeincompetence etc;
 Failing tochange with the times: - TheKodakstory;
 Ineffective marketing;
 Underestimating the competition;
 Concentration of risk - relying on a small number of customers;
 Lack offocus;
 Lack ofinsurance;
 Poor management structure;
 Nodata security or back-upsystems on ITfailure;
 Not seeking help.

14. ©Harbour Key LimitedAllrightsreserved
Thismaterialis publishedfortheinformationof clients. It providesonlyan overview of regulationsin force at the dateof thepublication,and no
actionshouldbe undertakenwithout consultingthe detailedlegislationor seekingprofessionaladvice. HarbourKeyLimited can accept no
responsibilityforlossoccasionedbyany personacting or refrainingfrom actionasa resultof the materialcontainedwithinthissummary.
Any (more) questions?......
This material is published for information purposes only. It only provides an overview and no
action should be taken without taking professional advice. Harbour Key Limited can accept no
responsibility for loss occasioned by any person acting or refraining from action as a result of
the material contained within this summary

15. ©Harbour Key LimitedAllrightsreserved
Thismaterialis publishedfortheinformationof clients. It providesonlyan overview of regulationsin force at the dateof thepublication,and no
actionshouldbe undertakenwithout consultingthe detailedlegislationor seekingprofessionaladvice. HarbourKeyLimited can accept no
responsibilityforlossoccasionedbyany personacting or refrainingfrom actionasa resultof the materialcontainedwithinthissummary.
Phil Mitchell
Director
For and on behalf of Harbour Key Limited
Midway House, Staverton Technology Park, Herrick Way, Staverton, Cheltenham GL51
6TQ
e pmitchell@harbourkey.com
t +44 (0) 1452 713277
m +44 (0) 7877 409102
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Harbour Key Limited is a company registered in England and Wales number 07483339.
Registered office: Midway House, Staverton Technology Park, Herrick Way, Staverton, Cheltenham GL51 6TQ
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This material is published for information purposes only. It only provides an overview and no
action should be taken without taking professional advice. Harbour Key Limited can accept no
responsibility for loss occasioned by any person acting or refraining from action as a result of
the material contained within this summary