7 Reasons Businesses Fail To Grow and How To Avoid Them

In 2024, the UK witnessed a startling turning point in its business sector, as revealed by the UK Parliament’s latest Research briefing on Business Statistics, released on May 8, 2024. For the first time in over a decade, the businesses closing (at a rate of 11.8%) eclipsed the birth of new ventures (11.5%). This alarming trend not only spotlights the challenges facing today’s entrepreneurs but also calls for an urgent review of the pitfalls that can doom businesses to failure. Every time businesses fail, there is a unique story, but we have uncovered some key themes which our CFOs considered to be red flags:

1. A lack of planning

   Too many small business owners create a business plan to get start-up funding, then never refer to it again. If this sounds familiar, it’s worth taking a moment to reflect on the value locked up in that plan. You have already invested time (and maybe money) in setting out how you plan to expand your company, so let’s dust it off and start putting your efforts to work.

   We know that the owners of growing, thriving companies continually develop and implement their strategies – this is the key to achieving the objectives they’ve set out. These entrepreneurs then use their business plan as a benchmark. This allows them to measure progress towards their goals on a monthly, weekly and even, a day-to-day basis.

   Even if the numbers change, you still have some guiding principles to keep a focus on where you’re heading. For example, you can see how close you are to achieving a percentage increase in profit margins. You can also use the business plan to develop systems and processes that will help make the company more efficient. This puts you in a position where your business is more likely to survive and achieve its long-term objectives.

2. Lack of skilled people

   To expand your business, you need people with the right skills and knowledge to deliver your products and services. Unfortunately, a 2024 UK talent shortage survey by the Manpower Group showed that 80% of companies are struggling to find skilled talent – these unfulfilled roles can pose a threat to a company’s productivity, efficiency, and future growth.

3. Lack of expert advice

   Businesses fail to achieve their growth projections simply because their owners and management team don’t have access to people with the right expertise. Quite often, business owners are not even aware of how easy it is to get help from people with experience of growing companies. Whether you choose a part-time CFO (backed by a global team) or another trusted advisor who is on your side and shares your passion, you need to work with people with vision, ambition (for your business) and experience of business expansion. You need someone you can rely on to guide you and help you overcome obstacles to growth.

4. Inadequate risk management

   When the managers in a company have poor risk management skills, we see an inconsistent approach to this key aspect of leadership. It is critical for your team to identify, assess and control the internal and external threats to the company’s capital and earnings. Without this, you could be exposed to excess workplace accidents, failed projects, computer security breaches, loss of contracts, higher costs, legal action and, in the very worst cases, closure.

5. Poor financial management

   Quite often we find that CEOs of small companies lack sophisticated financial knowledge. They have many other admirable attributes, but this is an area where many struggle. If this sounds familiar, you should seek support from a CFO who has experience and won’t judge you or your business. Bringing the issues into the open, with someone who is firmly on your side, will help you address the barriers that could hamper your business expansion plans.

   If you don’t tackle the status quo, poor financial management can lead to inadequate controls, high overheads, and overly optimistic financial forecasts. Unfortunately, business owners don’t always realise that rapid growth can have a huge impact on cash flow and they can come unstuck as a result.

6. Too little market research and poor marketing efforts

   Inadequate market research can have disastrous consequences for any company. The last thing anyone wants for your business is that you expend time and energy trying to sell to an audience that is not interested or can’t afford to buy your products or services.

   Similarly, your company could miss opportunities such as joint ventures or expansion possibilities and overlook threats such as new market entrants or changing consumer tastes.
   You need to have realistic expectations of your marketing’s reach and likely sales conversion ratio. This sounds easy but we find that it’s actually very hard to keep a fair perspective when you’re so close to your own products and services.

   Assuming your market research is adequate, your company still needs effective marketing to ensure your target audience is aware of your products and services. You need to send the right message to the right people at the right time. You also need to have the right ethos and skills in the business to make sure you can deliver on the promises that marketing is making to your prospects and customers.

7. Lack of funding

   Your company’s growth might plateau due to a lack of funding. This is a particular risk of businesses failing if they company is past the start-up phase, doesn’t have further assets to borrow against. It can be very frustrating, but it is a common challenge that our CFOs help clients to overcome. Through our team approach and our exceptional network of contacts, we help clients access the funding they need to fulfil their ambitions for growth.

Grow your business with an experienced CFO who has a track record in helping businesses succeed. The first step is easy. Just book a no-obligation, 30-minute discovery call by dialling 0800 169 1499 or completing our contact form. Our in-house team is here to help get your business scale up journey underway.