Why Nearly 500,000 Small Businesses Are At Risk Of Failing

Why Nearly 500,000 Small Businesses Are At Risk Of Failing

The Guardian isn't the only one publishing reports of over 500,000 small businesses being at risk of failing within the next few days. The Federation of Small Businesses also released a report with the same statistics. Small businesses were already up against the odds, with the statistics showing that only 25% of B2B startups are left standing after 15 years. The majority don't make it past the first five years, with 45% of B2B startups going out of business.

The news that 500,000 small businesses in the UK will go out of business within the next few days alone is worrying. Below, we'll look at why it's happening, what brands can do about it, and what it means for the future of small businesses.

Why Are So Many Businesses Set To Fail?

The chairman of the Federation of Small Businesses, Martin McTague, has recently spoken out about the state of the economy and the direct impact on small businesses. Rising costs due to inflation are causing production prices and general business running costs like office bills to almost double. Without a fresh wave of government support for small businesses, Martin McTague believes that half a million small businesses will fail within the next few weeks. Raising prices on the shop floor simply isn't enough to combat the issue.

The statistics show that 40% of small businesses had less than three months worth of funds to continue operations. Combine that with the inflation of interest rates on business loans and the increased difficulty in acquiring a loan, both B2B and B2C small businesses are beginning to panic. The Bank of England has estimated inflation rates will peak at 10% later this year, so with rates continuing to rise, can small businesses do enough to stay afloat?

What Can B2B Brands Do That'll Prevent Failure?

Aside from raising prices on the shop floor in an attempt to counteract the rising procurement costs, B2B brands should focus on retaining loyal customers that are more likely to spend money rather than focusing on new business, which is often expensive during the onboarding process. The statistics show that 65% of business comes from loyal customers, and loyalty is something a B2B customer loyalty programme can nurture. 

Not only that, buyers are 83% of buyers have said they would be open to referring a brand to other buyers after a successful experience. A successful experience now centres around a self-service and remote sales experience - the brands that succeed are the ones that recognise millennial buyers now want self-service options. A self-service option is also more cost-effective than in-person meetings. Facilitating self-service by providing an eCommerce shopping experience, for example, encourages 35% of B2B buyers to spend over $500,000.

What Does The Future Hold For Small B2B Brands?

The peak of inflation rates is yet to come, and combined with supply chain issues caused by faulty software and problems with trade agreements - it's a bleak future for small businesses in general. Still, B2B trading holds the majority of the market. It's five times bigger than B2C, with a $14.9 trillion global value, more substantial transactions, and more opportunities for trading globally. 

Careful expenditure management, increasing shop floor costs, and looking for ways to encourage loyal customers to spend more can help combat the ripple effects of inflation that are rocking the business world. 

Running a business was never easy, but the pandemic and other political issues worldwide have created choppy seas for small brands to navigate. With a lack of access to funding and the promise of further increases in inflation rates, the government needs to do more to support small businesses over the next few months.