2009: Business start-up trends

A statistical look at the type of sectors people are starting their own businesses in

People start businesses for different reasons. Many simply want to be their own bosses and a lot of these people start businesses in sectors that they’ve previously worked in. Others have an idea or spot a gap in the market and try to exploit it. A small number look to join growing sectors in a bid to get rich quick. Whatever your reason for starting a business and whatever sector it’s in, you’ll need to do some market research before taking the plunge.

Even if you’ve 100% confidence in your business idea and capabilities, a downturn in the market could mean there’s simply not enough demand for you to succeed. Alternatively, a struggling market might help you realise you’d be better off targeting a niche rather than mainstream audience.

Anyone investing in your business will also expect you to have considered the market you’re about to enter and your business plan will look stronger for having considered these aspects.

The Office of National Statistics data on business demography, published annually, offers a good insight into the types of businesses that are on the increase or decline (see the 2009 figures in Table 1 below).  

When looking at the sector you intend to enter, consider not only how many businesses were started in 2009 but how it compares with the number which closed in that sector. Is it a growing market? If so, has that now been fully exploited and will it drop moving forwards? If there were more deaths than births in the sector, why is that?

Also consider the changes to the total number of businesses that occurred during 2009.

For instance, the professional, science and technical sector was one of few which saw more new start-ups than closures in 2009 – suggesting that the market is faring well in the recession and has good growth prospects.

If you’re looking to enter a market that’s losing a lot of businesses, you’ll need to consider why this is and research which particular firms are suffering and why.

Additionally, you should try and consider the outside influences that are likely to have affected start-up and stock business figures. For instance, how much have the hotel and restaurant trades been affected by the smoking ban? If they have been hit by more people socialising at home, is there a gap in the market to produce domestic entertainment products?

Local businesses

National start-up statistics are important to consider, but are by no means relevant to every situation. For instance, trends may vary in different parts of the country and at different times. The local economy will also affect your chances of success.

Unless you’re about to launch on a national scale, probably the most valuable research you can do is to research what need exists for your business locally. Look how many other similar businesses are in the area and target places with little competition or where there’s room for competition, either in terms of better quality service or on price.

Making trends not following them

There’s also the argument that trends should be made and not followed, and there’s some truth to this. The telecommunications industry is full of very young bold, and now wealthy, individuals who proved a lot of sceptics wrong, and it can pay to be at the forefront of the latest movement.

However, over-confidence can also be perceived as arrogance or naivety, and it’s always worth checking the state of the markets even if you then choose to ignore them. Anyone walking into a bank confident about launching in construction but oblivious to the current difficult market in the sector won’t be taken seriously – bear this in mind.

TABLE 1

Approximately 236,000 VAT registered businesses started in the UK during 2009 – a larger number in fact than the 205,700 which started in 2007, before the recession began. The breakdown by industry was as follows:

Table 1: Business Demography 2009: Enterprise births, deaths and survival

 

 

Active (000s)

Births (000s)

Deaths (000s)

Count

Rate (%)

Count

Rate (%)

Production

157

11

7.3

16

10.1

Construction

336

29

8.7

44

13.2

Motor trades

76

6

7.9

7

9.2

Wholesale

120

10

8.1

13

10.5

Retail

221

21

9.6

26

11.6

Transport & storage (inc. postal)

82

7

8.5

11

13.2

Accommodation & food services

163

20

12.0

23

14.3

Information & communication

171

19

11.1

23

13.3

Finance & insurance

35

3

9.5

4

12.6

Property

87

8

9.1

11

12.7

Professional, scientific & technical

380

48

12.5

42

11.2

Business admin & support services

206

29

13.9

31

14.8

Education

34

3

10.1

3

9.2

Health

87

7

7.9

6

7.2

Arts, entertainment, recreation & other services

187

15

8.0

19

10.2

Total

2,342

236

10.1

279

11.9

Source: Office for National Statistics

The death counts reported in this table are provisional.

 

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