Small business survival rates are as high as 91% after one year of trading, but plummet to just 40% within five years, new research has revealed.
ONS figures analysed by tech firm Ormsby Street show that four in 10 small businesses will have ceased trading within five years of launch.
The UK is becoming increasingly entrepreneurial, with people viewing working for themselves or launching a small business or start-up as a viable and rewarding career option.
But Martin Campbell, managing director of the software house, warned that many businesses will encounter financial issues within the first five years.
“A small business can fail for many reasons of course, but poor cash-flow remains one of the main causes of problems,” he said. “Poor cash-flow is mostly caused by late payment of invoices and this is certainly something that can be addressed by any small business. Measures include being strict and upfront about payment terms initially and using the right tools to provide insight into how they should trade with customers and what action to take to reduce risk of non-payment.”
Ormsby Street’s data reveals that, on average, UK small businesses that regularly credit check their customers are around 30% less likely to go out of business in their first 12 months than businesses which don’t credit check.