Incompetence and bad management responsible for more than half of failing start-ups

15 September 2015 -

The latest research from CMI reveals how professional bodies and business schools can help SMEs grow their business successfully

Poor management and incompetence are behind more than a half of start-up failures in the UK, according to the latest research from CMI.

The analysis, based on UK-wide data on SMEs from the Office for National Statistics (ONS) Business Structure Database and the UKCES Employer Skills Survey, found that nearly half (44%) of businesses founded in 2011 had failed by 2014, with incompetence and bad management responsible for 56% of those failures.

The situation was worst in Northern Ireland, with only 49% of start-ups surviving more than three years (see map, right).

Exacerbating this problem is the finding that only 42% of small businesses have provided management training during the last 12 months, compared to 89% of businesses with more than 250 staff.

The South West of England is the highest-ranking in the UK for providing management training, with 46% of organisations in the region having trained their managers in 2013. It is worth noting that the South West of England also has the highest survival rate for start-ups at 59%.

Emma-Jane Packe is director of The Supper Club, a membership club exclusively for fast-growth entrepreneurs. She said SMEs could benefit from learning from a network of companies that are facing the same challenges as they look to grow their business.

“We’ve worked with hundreds of entrepreneurs and SMEs and find that while the circumstances may differ, 95% of the challenges faced by business owners are common across all sectors,” she said. “Having the skills, along with a capable team, to manage through these is imperative but sharing with a peer group can help you find solutions faster and be an invaluable resource in helping you scale your business.

“We say to all SME business owners, we know it can be lonely being an entrepreneur, but the support is out there to help you achieve growth.”

Anne Kiem, chief executive of the Chartered Association of Business Schools, said that business schools can also be a key source of information and support for start-ups and other small businesses, and can act a driving force for future growth in the sector.

“The UK’s business schools are full of world-class business expertise and knowledge, and with a business school conveniently located in every region, including those who hold the Small Business Charter, they are perfectly placed to support the growth of small businesses,” she said. “As this report has evidenced, those small businesses that have received support from a business school have received high quality advice and professional development to start, grow or reshape their business.”

The Growing Your Small Business report also highlights how a lack of professional management skills is holding back UK productivity and employment growth, with only 16% of all new SMEs found to be fast-growing.

As part of the campaign, a new ‘heatmap’ has been developed to provide key information on the qualifications, networks, placements, business support and professional management qualifications being provided by local business schools to help small businesses.

Ann Francke, chief executive of CMI, said: “Small businesses are a vital part of our economy, yet as our report shows their growth is being held back by poor management and leadership. CMI has an important part to play in changing that and improving the productivity of small business. Our online heatmap gives managers a simple tool to find the business schools and publicly-funded support programmes available to help them.

“The heatmap also shows the business schools involved in the Chartered Manager Degree Apprenticeship, which will give small businesses the chance to train graduates on a scale that hasn’t been possible before. Small employers will benefit from specific support measures, including financial subsidy, making it easier for them to develop the managers and leaders they need.”

The report, which is being launched today at the House of Commons, is the result of a nationwide roadshow hosted by business schools, CMI and partners involving 1,200 managers sharing their growth stories and how business schools can play a key role in developing the management and leadership capability of owner managers, recruiting and development new managers, and supporting both their survival and growth.

To use the heatmap and find out more information on the Growing Your Small Business Campaign visit www.managers.org.uk/growingSMEs and get involved in the conversation on Twitter using #GrowingSMEs