Will your business make it to 2020?

Four in 10 SMEs may not make it past their fifth anniversary, according to a new study based on ONS data. Here are sectors that have the best SME survival rates.

Small and medium business survival rates are as high as 91 per cent after one year of trading, but after five years just four in 10 small businesses will still be around.

But which sectors support SMEs to thrive and which are just not conducive for entrepreneurs?

Fintech firm Ormsby Street analysed ONS data with its new business survival calculator to reveal the strongest and weakest sectors for SMEs to make it in the long run.

The best

Information and communication based businesses and retailers have the highest new business survival rates after one year, but for longer-term survival, businesses in the health and education sectors fare the best.

They were the only two sectors in which more than half of businesses launched were still trading after five years.

Property-based businesses were one of the most likely to fail after one year of trading, but proved a much better long-term option when looking at survival rates over five years.

The worst

Accommodation and food services, and business administration were the two industries most likely to fail in the long-term, with both types of business filling the bottom two places after three, four and five years.

Financial services doesn’t fare well either, with an expected 39 per cent survival rate for SMEs by year five.

The verdict

Ormsby Street’s MD, Martin Campbell believes start-ups mainly fail because of cash flow problems, exacerbated by the late payment of invoices.

Measures to counter this 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, according to Campbell.

“There is no shame in a business failing – in the US it is almost seen a badge of honour to so and if it does happen then it should be used as valuable experience for the next venture,” Campbell said.

“But small businesses can certainly improve their prospects by protecting themselves against some elements that might threaten their existence.”

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

Related Topics