Characteristics of successful adolescent businesses

This guest article was originally written for Real Business.

There is much hype about how the UK’s small businesses are vital to growing the economy. However, a lesser-known fact from the UK Government is that of the 400,000 businesses started in the UK in 2012, 20 per cent failed in their first year and 50 per cent will have failed the following year. This blog was originally written for Real Business.

The stark reality is that start-ups come and go. But where the real power lies is with the business ‘adolescents’ – those companies that have grown enough to hire full-time staff, to be part of a supply chain and to pay taxes, but which are still small enough to be agile, imaginative and hungry. These businesses are the ones to watch.

So what are the characteristics of those businesses that survive beyond the milestone third year – and then to the fifth year and beyond?

A report by the University of Surrey and Kingston Smith in 2012 ‘Success in Challenging Times’ outlined some reasons for success for the adolescent business as mixed model financing both to start and sustain a business, direct referrals and search engine optimisation, a culture of innovation, and flexibility to respond to market conditions.

However, in terms of start-ups, undoubtedly the primary cause for those giving up in the first few years lies in the fact that it is difficult to make a profit in the early days. There was even a recent study of Social Enterprises citing that a key indicator for a failing early stage enterprise was a CEO that was taking home a salary. How depressing…

But the key reason why many start-up businesses fail lies in the area of purpose and values. Those businesses that are started for the wrong reasons (to sell or to make a profit, and therefore without the passion and persistence that is essential for success) can be recognised a mile off and will ultimately fail. Other reasons for difficulties can include bad philosophies, not understanding the customer or being based in the wrong location.

Other common traits are as follows:

In it for the long haul

The successful founder knows that the early years will be tough, but that they are building value for the long-term and that this requires a commitment. There is no safety net or room not to be 100 percent committed.

Don’t be afraid of hiring

Many businesses stay small or work with freelancers as the concern of hiring feels overwhelming. Whilst freelancers can help grow a business, if a business is to establish a culture that can support growth, then staff must be on the payroll.

Focus relentlessly on the problem you solve for your customer

It is extraordinary how many companies build a glossy marketing spiel, a trendy website and a great sales pitch without any consideration for the customers that they are trying to reach. Those that succeed build a firm knowledge of the customer and the problem that they are trying to solve.

Advice, advice, advice

A team that gives advice and support is a crucial indicator of success. The savvy founder will recognise early what they don’t know and will build a team around themselves to fill the gap.

Knowing yourself

The inspirational founder that gets a company to a critical point of growth also knows when to back off, make other hires, prepare to take on a new role that plays to his or her strengths or, indeed, to exit entirely.

With all this in mind, I wonder if we should shift some of the current business support available from start-ups to focus on our successful business adolescents?

Written by Michelle Wright, CEO of Cause4.