The stats are shocking. In any other area of life, an 80% failure rate would constitute an unqualified disaster, but in business, the fact that only 1 in every 5 start-ups survives to celebrate its 5th anniversary goes unchallenged year on year.
In fact, it’s even worse than that: of the 20% that do make it to 5 years, only 20% will make it through the next 5 – meaning only 4% are still trading after 10 years!
Nobody expects or sets out to fail, and given that one of the first things a new business owner will do is appoint an accountant to advise and support them with all things financial, why is it that things go so horribly wrong for so many? Could it be that some accountants are not doing everything they could do to support their clients?
Of course, there are still some practices out there that consider offering business advice beyond their remit, preferring instead to focus exclusively on more traditional services such as compliance and preparing tax returns.
Taking this approach is a real missed opportunity in our view, and certainly contributes to many failures. But even accepting some start-ups consciously choose to put their fate in the hands of compliance-only accountants doesn’t go all the way to explaining such a high rate of closure, and for the full story, we need to look at the causes that lie behind the failures.
It’s a sad fact that many start-ups are forced to close with full order books, failing not because they lack customers, but because of a shortfall in profit or cash. With a basic understanding of profitability and cash flow, these common causes of failure are completely avoidable, and any accountant worth their salt should support the business owner until they’re confident in both these areas.
Given the failure stats then, we are forced to conclude that many of those accounting practices purporting to offer business advice are either doing so in name only, or doing it badly.
How should accountants help their clients?
Accountants working with start-ups and small businesses must recognise the importance of their clients’ focussing on generating revenue as well as managing costs. They need to ensure owners recognise that being good at delivering a product or service is not enough on its own, and that success requires owners to have a good understanding of all business areas – in particular, sales and marketing.
Too many start-ups set out without a clear pricing strategy and without having identified their ideal client base, quickly finding themselves working hard for little profit – with customers who don’t fully appreciate the value of their service. Many more under-price and over-deliver with the result that they find themselves flat out busy, but making little or no money.
A basic understanding of the principles of sales and marketing will help business owners avoid these – and other critical mistakes. Responsible accountants should, in our opinion, develop a support network for their clients, giving them the opportunity to acquire the knowledge they need, and increasing the odds in favour of their success.
How Inca Improves Start-Up Success Rates by 185%!
Start-ups choosing Inca as their accountant improve their chances of making it to their 5th anniversary by 185% compared to the national average! So how do we do it?
Besides doing all the compliance stuff you’d expect (though doing it rather better than many other accountants we like to think!), and providing tax advice that ensures the business owner and their family get to keep as much of their earnings as possible, we surround our clients with expert business help and advice to give them the very best chance to flourish.
All Inca clients benefit from access to professional support and advice when they need help, professional development through regular workshops delivered by industry experts, and referrals and introductions through our vast network of contacts.
Our business support focuses on helping owners acquire skills in three key areas:
- Marketing: Learning how to identify the ideal customer and generate a consistent pipeline that’s full of the right kind of opportunities.
- Selling: Learning how to convert opportunities into regular customers who are prepared to pay the right prices, and getting into the habit of regularly testing and measuring sales conversion ratios to become as efficient as possible.
- Planning: Learning how to begin building a real business that can work without the business owner needing to be there all the time.
It isn’t rocket-science, but we’re unaware of other accountants who focus on providing their clients with these fundamental business skills.
Every business failure is a tragedy for an individual and their family, but at Inca we believe there’s a great deal accountants can do to help their clients succeed. It’s an approach we call ‘Caring Accounting’, and we’ve made it our mission to do our bit to help turn the stats around!
Can We Help You Improve
Your Odds by 185%?
Have you recently started a new business? Do you know someone who has?
We want to give even more new businesses the best possible chance of success, and we’d love to meet with owners of professional service businesses, and businesses selling their time and expertise (rather than products) based in Oxfordshire and Berkshire.
Call us now on 01235 868 888 for an informal chat!