Business start up 'need long term financial planning'

Entrepreneurs looking to set up a business have been advised to make sure they have financial flexibility and have planned their finances in advance.

A spokesman for the Federation of Small Businesses (FSB) said finances must be planned “well in advance” and backed up with lots of research in order to maximise the firm’s chances of success.

Last year saw the largest number of small businesses set up since 1988, according to Barclays Bank.

But, the FSB spokersperson pointed out that three out of five start-up businesses fail within the first three years, so it is important to make sure the finances are flexible and planned for at least that period.

He added: “You do need to have quite a lot of financial back-up and quite a lot of leeway if things don’t go to plan. If you don’t make as many sales as you thought you might in your first year then you need to have something to fall back on so a healthy financial margin for error is always advisable, particularly in economic conditions that are not particularly favourable.”