COMPANIES House has reported that in the last quarter of 2020 over 200,000 new companies were incorporated, up by over 29 per cent from the comparable quarter in 2019.

This is a really interesting trend, which appears to me to have been sustained through 2021. So what is going on?

First its apparent that the impact of the Covid-19 pandemic is playing its part. Many people have lost their jobs. Many others have had time to reflect on whether they want to stay in the same job. For the natural - and perhaps also the not so natural - entrepreneurs it’s felt like the right time to set up a new business.

Secondly, technological developments and changing customer behaviour makes it easier than it has ever been for a new business to access its potential markets.

So why wouldn’t you set up a business if opportunities are so great and the alternative of “regular” employment has become harder to find or less attractive. Well, one reason is that it’s always been the case that the survival rate for new businesses is low. You can take your pick of the statistics but it seems to be broadly agreed that 20% of start-ups will fail within a year and less than half will make it to five years.

The reason why young businesses fail are reasonably well known, although possibly not well-known enough among people starting up businesses.

First and foremost of these is there being no actual requirement for the product or service. No matter how passionate one is about one’s offering, if it’s something no-one actually wants then a business idea is going nowhere.

Perhaps a better, or at least more positive way of looking at things, is to focus on the things that will give businesses the best chance of succeeding. In my experience these include taking time to assemble the right stakeholders, proper objective market research and protecting key assets including intellectual property.

Finally, cash. Cash is the lifeblood of a business and every new business needs a clear plan as regards when and how it is going to start generating more cash than it spends. Until that point a business needs to decide where its cash is coming from. The good news is that there are many sources of cash available, but they won’t all be appropriate. Picking the right financial backers is perhaps the most important thing of all.

For further help or advice, please contact chairman and Head of Start-Up/Scale-Up, Jonathan Oxley, on 01904 561452 or jonathan.oxley@luptonfawcett.law.