However, the research also reveals that the survival rate for start-ups increases if there is an older director on board.
When a young director, aged between 16 and 25 teams up with someone aged 26 or older, nearly forty per cent of businesses survive post three years (compared to just a third when started by a sole young director).
Survival rates soar to nearly half when a young director joins forces with more than one older director, demonstrating the clear advantages for young entrepreneurs to tap into the experience, industry knowledge and expertise that exists amongst more experienced directors.
Simon Streat, Managing Director of Experian’s UK SME business, commented: “Such strong entrepreneurial appetite amongst young people is exciting and encouraging to see, yet just one third of business start ups with a young sole director survives for more than three years. With young directors often lacking the experience, capital and contacts needed to survive those first few tricky years, our research shows that they shouldn’t underestimate the value in partnering with an older director. The reality is that start ups comprising both young and older talent have a greater chance of survival than those businesses that start up with just young directors aged between 16 and 25.”
Sector analysis
The analysis also highlights that young directors are 57% more likely to start up a business in sectors defined as ‘vulnerable’ by Experian than those sectors defined as resilient.
Vulnerable sectors include construction, retail and hotel/catering – essentially sectors where short term operating conditions remain challenging and the likelihood of failure is often higher than in resilient sectors.
Overall start-up growth has been higher within knowledge intensive and high tech industries, a positive sign for future growth. While these sectors are more resilient and survival rates can be higher, specialist knowledge may be a contributing barrier to entry.
Impact of unemployment
The total number of business start-ups over the past three years has been driven predominantly by sole directorship companies, which now comprise around two thirds of all start-ups.
Areas that have a high level of unemployment have seen higher levels of start-ups which may be because those who are unemployed see fewer options than to set up on their own.
Some areas with high unemployment have also experienced a higher rate of business insolvencies indicating a lack of market demand for their services in those areas, or a lack of business skills.
Regional change
The East Midlands region saw the highest increase in the number of young directors setting up their own businesses. A number of factors may have influenced this, including the success of programmes in the region aimed at specifically helping young people set up their own businesses.
