UK Small Business Closure Report 2016
We surveyed 300 small businesses (0-49 employees) around the UK to find out when and how they plan on exiting their business, along with their thoughts on the Brexit.
The Bizdaq UK Small Business Closure Report was created to provide an overview of small businesses in the UK today, and to see how many hard-working small business owners are looking to leave their businesses in the near future. We surveyed 300 small business owners to see how those running the UK’s small businesses are faring, and their outlook on the future of their business.
Small businesses are the lifeblood of the UK economy, and make up 99.3% of all UK businesses, so it’s fair to say their opinions matter. Small businesses are defined as having 0-49 employees.
- Small Businesses employ on average 4.85 people
- 424,000 small business owners plan on selling within the next five years
- 370,000 small businesses plan on ceasing trading in the next 5 years
- 1.8 million jobs could be lost in next 5 years
- 370,000 jobs could be lost in the next 12 months
- Small business owners in London most likely to be thinking about exiting business
- Small business owners in East of England least likely to be thinking about exiting
- Small businesses in East of England had lowest average turnover
- Small businesses in East Midlands had highest average turnover
- 41% of UK small businesses think UK should stay in EU
- 44% of UK small businesses think UK should leave EU
- Average revenue of businesses wanting to stay in EU is £9,000 higher than those wanting to leave
The average UK business
The UK business landscape is vast and diverse, and this was certainly reflected in our respondents.
Using our responses we’ve been able to paint a picture of the average UK small business, and found that the average UK business makes £89,840 a year, employs 4.85 people and that 34% of small business owners are looking to exit their business in the next 5 years.
This isn’t just a single average however – we can reveal that the revenue changes depending on size of business:
- A sole trader has an average revenue of £29,166
- Small businesses with 2-5 employees have an average revenue of £96,750
- Small businesses with 6-49 employees have an average revenue of £176,441
This, unsurprisingly, shows that small businesses with more employees have a higher annual revenue than those with fewer, or no, employees. That isn’t to say that larger small businesses are more profitable though – with each new employee comes a new wage to pay.
The UK by Region
Using the data we’ve received from businesses across the UK, we’ve been able to plot the average turnover, average number of employees and what percentage of small business owners are planning on exiting their business in the next five years.
We found that whilst the average business has a revenue of £89,000, it’s the midpoint between two very different regions. There is a gap of £72,000 between the region with the highest average revenue – the East Midlands (which has an average revenue of over £130,000) and the region with the lowest average revenue - London (which has an average revenue of just over £58,000).
Closing isn’t the only way an owner can exit their business. People can sell a business, sell part of it and become a reduced partner, or even pass it on to family.
When the time comes to exit their business, small business owners of the UK have very different plans:
- 25% of people don’t know how they will exit their business
- 24% plan on selling their business
- 21% plan on ceasing trading
- 8% plan on passing their business to a family member or partner
- 3% plan on dying before exiting their business
- 19% other – including starting a new business, retiring, and employing staff to run the business for them
Whilst seeing that 24% of business owners plan on selling might not be too surprising, what is surprising is that a quarter of small business owners don’t know how they’ll exit their business and a further 21% plan on closing. That’s a massive 45% of UK businesses that either don’t know or don’t plan on passing the business on once they exit.
With the EU referendum getting ever-closer, we also asked small business owners what their opinions were on whether the UK should remain in the EU or whether it should leave. We found that small business owners are still largely divided, with an almost identical split between remain and leave – 41% said the UK should stay, 44% said the UK should leave, and 15% are still undecided.
This near-identical divide between the two camps, just a 3% difference, suggests that the UK’s small businesses still aren’t sure what a Brexit would mean for them and how it could affect them.
We found that the revenue of a business does affect its stance on the Brexit – businesses who want to stay in the EU make, on average, £9,000 more than businesses who want to leave.
- Business service businesses evenly split on brexit
- The hospitality industry wanting to leave - 55% voting leave, 34% voting stay
- The construction industry wanting to leave - 57% voting leave and 29% voting stay
- The education industry wanting to stay - 68% voting stay and 32% voting leave
- The IT industry wanting to stay - 44% voting stay and 37% voting leave
- The professional services industry wanting to leave - 39% voting leave and 36% voting stay
- The wholesale industry voting to stay - 59% voting stay and 35% voting leave
The Brexit has also divided industries, with:
Bizdaq, the online marketplace for selling or buying a small business, is dedicated to making the process of selling a business easier and more cost effective for small business owners. Bizdaq features include an online valuation tool that instantly estimates the likely sale value of any business, step-by-step instructions and notifications to help business sellers and buyers through the business transfer process for themselves. This report is part of Bizdaq’s mission to increase the number of small business owners successfully selling their business and thus avoiding a sudden closure when the business is no longer viable, saving jobs and enabling business owners to realise the value of their hard work.