Balloons can inflate or deflate, new research has revealed a new type of business, a balloon business, typically small or medium-sized: that need to expand or contract throughout the year to meet business demands.
New research from Direct Line for Business has identified approximately three million Small and Medium Sized Enterprises (SMSs) in the UK that need to expand or contract throughout the year to meet business demands. These companies have been named “Balloon Businesses,” because they don’t follow a continual growth trajectory; but instead recruit and release employees in response to business needs, or open pop-up or temporary locations as demand fluctuates.
Almost three quarters (74 per cent) of SME owners have set-up their business so they can scale it up or down without affecting its overall viability. Direct Line says that these firms bust the myth of linear business growth and are fast becoming the backbone of the UK economy, currently employing around 12 million people.
Nearly half (49 per cent) of SMEs say the headcount of their business fluctuates throughout the year, followed by a third of micro businesses (32 per cent) and around a quarter (27 per cent) of sole traders. When it comes to premises, a third of SMEs say the number of locations they operate from changed between the second half of 2017 and 2018, as businesses increasingly take advantage of short term leases and pop-up locations.
SMEs also highlight a lack of consistent revenue throughout the year, with significant peaks and troughs. Decision makers identify June as their most profitable month, while January is traditionally the month they record their lowest revenues.
Direct line says that this reflects how UK SMEs are incredibly resilient and are able to adapt to this changing environment in order to succeed. This extends beyond functional changes too; over the last five years, more than 2.6 million (47 per cent) of these companies have started offering a new product or service outside of their primary industry, with one in nine (11 per cent) expanding their service or product offering every year. In the first half of 2018, SME businesses in IT & computing were the most adept at diversification, with over two fifths (44 per cent) starting to offer products outside of their primary sector.
Jazz Gakhal, Managing Director at Direct Line for Business, said: “Traditionally business growth has been viewed as a linear process, but small companies are now incredibly agile, hiring contractors to meet demand and taking advantage of short term leases to test the landscape and expand their footprint. By adopting flexible working practices, they can quickly scale up or down their operations without putting the company’s survival at risk.”
British business optimism
The reseach also found that UK SMEs are extremely optimistic about their growth prospects in the next year, with nearly two thirds (64 per cent) of businesses anticipating their revenue will grow by an average of 10.6 per cent over the next 12 months. A third of SMEs (33 per cent) plan to employ new full-time staff, while 28 per cent plan to bring in part-time staff and 21 per cent plan to hire temporary staff to deal with seasonal business demand.