Your fledgling business stands a much better chance of thriving if you build in resilience from the earliest stages
Business is risky – that’s part of the thrill for many entrepreneurs. But some of those threats can endanger a promising company.
Even before Covid-19 threw business models up into the air, fewer than half of UK start-ups made it beyond the five-year mark, with a fifth failing in the first year.
With deeper analysis at set-up and in the early phases of your business, you can build an armour of resilience for the unpredictable years ahead.
1. Create a community
Through market research, you know your target customer profile. You know what they buy and how you’ll differentiate your offering from that of your competitors. Now go a step further and get these early customers on your side. Building a sense of community will give your business a more enduring foundation than a purely transactional relationship.
Consider offering deals, discounts, free workshops or other incentives. Perhaps ask customers to help beta-test your services or your website. The aim is to involve your first customers and turn them into loyal champions, who can stimulate a chain of word-of-mouth referrals.
2. Define your purpose
Corporate responsibility isn’t just for corporations. Small businesses often have a social purpose too – from the manufacturer that makes a point of sourcing its materials locally, to the café that provides space for arts performances. Define your values from the outset and make sure your customers know what they are.
Research shows that businesses with a clearly articulated purpose perform better. This will serve you particularly well during tough times: during the pandemic, over half of consumers said they were more likely to buy from businesses sourcing products locally, and almost half said they would favour businesses supporting local charities.
3. Create a double budget
Businesses flounder for many reasons, but simply running out of cash is the most common. One study suggests 38 per cent of start-up failures are due to shortage of funds.
Avoid unpleasant surprises by making two budgets at the outset. One should reflect your realistic hopes for your trading year. The second should set out how slower-than-anticipated trade would affect your cash flow. Think through how you would handle the second scenario and make contingencies as far as you can.
4. Anticipate shocks
Don’t limit your crystal ball-gazing to sales: consider other potential hitches too. Analysis by the Enterprise Research Council has shown that leaders who anticipate adversity, and plan for it, run more resilient businesses.
Covid-19 was an extreme example of an adverse event that disrupted many business models. But far less seismic changes could derail your plans – for example, if a key customer decided to take their business elsewhere or a vital supplier abruptly stopped trading. Sketch out a plan for each scenario and act now to defuse events that would be particularly paralysing – by sourcing alternative suppliers, for example.
Building up savings from the outset can help you develop a back-up fund so you’re in a stronger position if those shocks do occur. On the flipside, having money set aside means you’re in a better position to grab unexpected opportunities. With the HSBC Kinetic Current Account*, you can also open an instant access business savings account with no lock in periods so you’re better prepared for any surprises – positive or negative. Naturally you don’t have to open, have or maintain a HSBC Kinetic Current Account to open, have or maintain a HSBC Kinetic Savings Account.
5. Do a trial run
Before you make the leap into your business, try a pilot – for example, through a simple website or a pop-up shop.
Use this test to help you assess the market for your business and the strengths and weaknesses of your product. It’s also a way to assess your own skills and identify areas where you may need to enlist outside expertise. Learning these lessons in a lower-risk context will give your full launch the best possible chance of success.
You can apply for a new business account in minutes with HSBC Kinetic. So if you’re a sole trader or single director shareholder limited company, find out more at business.hsbc.uk.
Simply download the HSBC Kinetic app and apply in minutes. With most accounts opened in 48hrs.
*HSBC Kinetic is subject to eligibility, T&Cs, credit check and fees apply.
If you would like to open a HSBC Kinetic savings account without a HSBC Kinetic Current Account, please call 0345 587 3529 or +44 1397 436960 if you’re outside the UK.
This article was written as part of a paid-for advertising content campaign with HSBC.