There are over 90,000 SME’s with less than 250 employees in Greater Manchester that’s over 99% of the total business sector but this is in line with the national picture.
2 Most are Micros
Sixty five per cent are micros with four or few employees. This sector includes sole traders and micro businesses with limited growth potential or ambition. A further 15% are also classed as micros with less than ten employee. Most of the 80% will remain as small businesses.
3 Growth - new businesses
Pre recession they were growing at the rate of 11,000 per year, that’s fifty new businesses every working day in the year.
4 Deaths and absorbtion
They were dying at the rate of 9,000 per year. Some are absorbed into larger set ups but in the main they cease to exist and are classified, according to official statistics, as failures.
5 Eleven thousand new businesses
In a period of fourteen years*, there were 11,000 new businesses of which 11,500 were in business and related services. There was some growth in construction hotels, restaurants, transport, storage and communication. Businesses were lost in manufacturing, wholesale and retail. The largest growth was in business activities including real estate and property.
6 SME’s have a half life of 4.5 years.*
Almost a quarter of new businesses will fail within two years and half of them will disappear in 4.5 years. The long term survival rate is just 16% that means five out of every six businesses will fail over the period.
7 The average start up capital is £10,000*
The average start up capital for a new business is £10,000. Actually for women, the average value is £7,500. This is worthy of further research.
8 Gazelles of growth
Only 2% will emerge as gazelles classified as high growth businesses less than four years old, defining high growth as 20% plus per annum.
9 Sixty five reasons why businesses fail.
The insolvency service lists sixty five reasons why businesses fail. Actually there are only sixty four, “marketing problems” listed twice. The agency suggests over half fail because they run out of cash but this is to list cause of death as “stopped breathing”. Cash flow is the end game, like running out of water in the desert. The real problem in the desert is not water, it’s how you got there or just what are you doing there in the first place. Over sixty per cent of the reasons why businesses fail can be explained by management and the lack of some basic understanding of key concepts of business management. SME’s need advice, education and mentoring, as much as if not more than ease of access to finance.
10 Funding for SME start ups.
Of the 11,000 start ups every year in Greater Manchester, the initial funding was secured in the main from three sources, A: the three F’s, founders, family and friends, B: secured bank finance, short loans or credit card, and C: business angels or “Shadow investors”. Government grants accounted for under 10% of all transactions and the formal Venture Capital market is involved in less than 5% of start up situations.
Public Sector Venture Capital is high risk with limited returns. We can’t catch every rainbow or finance every start up. JKA