Start-up survival and the role of chartered accountants
27 January 2020: Iain Wright, ICAEW’s Director for Business and Industrial Strategy, explains how accountants are essential to entrepreneurialism, business survival and growth.
Apparently, more businesses are set up in September and January than at any other points in the year. These months make sense: they're probably the two periods when there is time to reflect, mull over that embryonic business idea and ask your family and friends whether they think you should go for it.
We are third in the world for ease of starting up businesses. This strength is reflected in the growth of the number of businesses in the UK over the last 20 years: in 2000, the country had 3.5m businesses; in every subsequent year until 2017 business births have reached 5.7m.
Recently, there is evidence that this long-term growth has stalled. In 2017, the number of business births fell by 32,000, the biggest fall since records began, even bigger than during the global financial crash of 2009.
I suspect there are a number of reasons for this fall: Brexit, inevitably, will play a part. A slowing economy and lower business confidence might reduce the perceived opportunities in the market for new and emerging businesses. Lower business birth rates might also reflect an altogether more positive economic factor, that of the UK’s astonishingly good employment record. There may be a link between high employment levels, growing pay and falling business start-ups – why leave the safety and comfort of employment for greater uncertainty running your own business?
There is also the question of business survival. If a business had been set up set up in 2012, the likelihood is that that business has now died. There is obviously a myriad of reasons for businesses coming to an end, but we can assume that those enterprises have encountered difficulties in things like securing growth funding or failing to manage cash flow. Early engagement with a chartered accountant could help a new business avoid some initial mistakes and increase the chances of not only survival but growth, increased profitability and long-term success.
Two things are vital to an entrepreneur embarking on a new business venture, certainly if they are setting up for the first time. First, there is the importance of good networking, especially with like-minded people who are not far removed from the start-up experience and can provide mentoring, signposting to new opportunities and advice on pitfalls. Second, the notion of a trusted advisor who can ensure that the new business doesn’t fall into bad habits which may compromise its chances of growth and survival is critical.
Chartered accountants are essential to entrepreneurs. They are invariably at the heart of local business ecosystems that are essential to enterprise. Helping to nurture and support such ecosystems is central to what I’d like the Business and Industrial Strategy Team to focus on, adding value both to our members and to the wealth-creators of the future.
ICAEW’s Business and Industrial Strategy team has been established to ensure that the knowledge, expertise and insight of ICAEW members in business are heard. Your views and experiences are invaluable to us, and we are in an exceptional position to use them to make a difference for our members and the good of the economy.