Interesting or….
I had an interesting conversation last week that ranged from the economy to business growth, personal income and around to statistics and support.
I want to share with you some of the key take aways in the hope it will enlighten, amuse or give you some insights or information you don’t already have.
First I want to mention the statistic that gets used a lot and that’s that 80% of new businesses go bust in the first 5 years, my first insight is that the numbers are right but the words are not, well not quite, the real statement is 80% of all businesses are out of business every 5 years, no matter how long they have been going, you can check Office of National Statistics (ONS) numbers and they bear this out with a fair degree of accuracy. If you doubt it pop into Woolworths, BHS or Comet today.
There is a good reason for the above numbers and that led to talk about the cost of living increase and inflation, and while inflation is currently sitting at around 3% over the last 5 years (2019-2024) the CPI which the government likes to use as its always lower ran at 24% for that period according to the Office of National Statistics, the RPI which includes the cost of housing ( we all live somewhere right even if the government don’t want to include the cost of that in their inflation numbers) was 34% which actually most people living a normal life would tell you feels about right. So, the cost of everyday life and therefore everyday business rose by somewhere between 24% and 34% (it’s closer to 34% honestly)
I know that’s not a great shock to any of us that mange our bills or go shopping, what might surprise you is that GDP (Gross Domestic Product, which is basically everything that was sold by every business in the country) rose by only 11%, that is not profit that is turnover so even the best case scenario is that we are 13% out of alignment, in reality it is much higher than that. As a country we saw a lot less growth in business than in costs, which goes some way to explaining the earlier 80% statistic.
Now what I can tell you from over 10 years of working with small businesses and speaking to thousands of business owners and leaders in that time is that around 20% of businesses grow in line with inflation and yet only about 3% of actually grow in excess of inflation in terms of profit by more than 1% or 2% which is another supporting factor in the 80% shutting down in a 5 year period.
The final kicker, the one I really wish I could do more about, the one I feel is my responsibility is the number of businesses that think they don’t need help, advice or support, or take their advice from people in the same situation or sometimes in a worse situation but with a fancy title like accountant or lawyer. In the last decade and thousands of businesses I have contacted about help and support I can tell you (because I know my numbers) that for every 100 businesses I reach out to about 3 on average are open to a conversation about what help and value I can bring.
That’s 3%, is it the same 3% that outperform the rest of the country’s businesses?
Well that I don’t know and I am currently unable to prove it but that’s stretching coincidence a little far.
You want to beat the odds, do what the people that beat the odds do and get some support, it doesn’t have to be me, but I am always happy to just have a conversation.
By Andy Walter
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