New research by the Association of Accounting Technicians (AAT) shows that one third of small and micro businesses failed to grow in the past five years. The study found that 33% have failed to grow revenue, whilst 31% haven’t seen an increase in profits since 2010.
According to the business owners polled, the key factors holding them back are the lack of capital, too much red tape and not enough support from banks.
However, over the next five years 76% of small firms expect to see an increase in revenue and 78% predict that their profits will rise.
Interestingly, according to another study, the key to success has little to do with red tape and funding. Xero polled over 2,000 entrepreneurs in the UK and the US to discover what makes some business owners successful.
According to the research, successful entrepreneurs are more likely to learn from past failures, invest in technology, value time with their families and build strong relationships with coaches and mentors.
Entrepreneurs who had experienced prior failure reported they were better at planning and financial management the next time around; and 71% described the closure of an earlier business as a positive thing.
The findings also show that the most successful business people are more likely to enlist the support of others including coaches and mentors. A third of successful entrepreneurs say they have turned to mentors, compared to just 14% of respondents who ran businesses that had to close.
The findings reveal that successful entrepreneurs work hard to achieve a healthy work-life balance. Nearly six in ten respondents (58%) cited spending time with family in the evenings as crucial to their effectiveness as a business owner.
Those that succeed also invest more in technology say the researchers. Nearly six in ten successful businesses (58%) use software to manage their finances compared with 14% of failures. In addition, 86% of successful small firms said they used technology to boost productivity.
Of course, investing in accounting software and technology in itself does not increase the probability of success. Rather it is the mindset and approach that results in the decisions to invest this way that makes the difference. Successful entrepreneurs have a positive mindset and are comfortable with failure.