Chapter 16 • Small businesses
There are few areas of business finance where the broad principles that apply to
large businesses do not equally well apply to small ones, but there are certainly some
areas where the emphasis is different and where small businesses tend to have their
own particular problems. In this chapter we shall consider these areas.Failure of small businesses
A sad fact about small businesses is the failure rate. The Bank of England (2001) cites
evidence on survival rates of new businesses. This is shown in Figure 16.1.Figure 16.1
Survival of new
businesses
Source: Adapted from
Bank of England (2001)
The rate of failure of new businesses (presumably nearly all small ones) is such that after four
years only 42 per cent still survive.By the end of four years, only 42 per cent of new businesses still survived. Though
the rate of failure seems to reduce as the lifetimes increase, it seems pretty certain that
further failures occur beyond the first four years. Other EU countries show a similar
pattern of new business failures. Though this information is not very recent, it shows