More young entrepreneurs entering "vulnerable" industries

11/30/2011



More than half of wannabe chief executive officers (CEO) are setting up businesses in "vulnerable" sectors such as hospitality, construction and retail, a new report claims.

According to the credit agency Experian, although nearly a quarter of young people have the ambition to set up a business on their own (22 per cent), 57 per cent set up in a volatile field, making their enterprises more likely to fail.

Experian's research shows that the two-and-half year failure rate of start-ups manned by a sole young director, aged 16 to 25, is around 45 per cent. It remains fairly high at 22 per cent throughout the first three years of starting up, reports the Liverpool Daily Post.

However, with the benefit of experience, hindsight, and older business partners, the survival rate is much improved. After three years, the success rate of a young director partnered with someone aged 26 or over rises to 39 per cent, and up to 48 per cent when there are even more members on the executive board.

Sectors like hospitality, although popular, are extremely difficult industries to newcomers to break into because of short-term operating conditions, comments Simon Streat, managing director of Experian's UK SME business wing.

"The challenge that exists for newcomers to the hospitality is lack of understanding of the sector and the challenges it faces," he told Big Hospitality.

"Successful hospitality business owners will tell you that success in the sector comes to those that marry a solid understanding of what makes hospitality customers tick with core business skills such as sales, marketing and finance," he said.

The British Hospitality Association (BHA) however refutes this argument, stressing that raising finance for startups, particularly in the hospitality sector, is much harder that in other industries.

Nonetheless, the BHA said that all entrepreneurs should indeed seek as much experience in the industry as possible before beginning their own venture.

"Work in the business for a year or so to get to know what it's like before you make any business commitment," a BHA spokesperson advised.






















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