By Edward Winterton, commercial director at Bibby Financial Services
While the UK economy is on go slow with the crisis in the eurozone impacting trade at home and abroad, small and medium-sized enterprises (SMEs) are finding new ways to adapt to the changing landscape. By combining common business practices with more innovative methods, some firms are seeing an upturn in trading performance and are in fact, growing increasingly confident about the future.
Exploring opportunities overseas, taking a bolder approach to product innovation and putting greater investment in staff development are just a few examples of how some businesses are excelling in the current climate.
The most recent GDP figures from the Office for National Statistics which show the UK economy contracted by 0.7 per cent in Q2 2012 will have been greeted with a chorus of groans from the general business community.
However, business owners and managers in the country are helping the UK avoid a descent into the economic quagmire by carefully implementing a number of recession-busting tactics.
Business wisdom, strategic planning, cash flow protection and cost monitoring remain as imperative as ever. But product innovation, investment in staff and new markets, as well as a willingness to take risks, are also key to commercial growth.
A number of companies are heeding this advice, enjoying the rewards and challenging the perception that it’s all doom and gloom out there. Indeed, our latest quarterly Business Factors Index, which tracks the performance and outlook of 4,000 business owners, revealed a third (47 per cent) of firms in the UK remain positive about the future.
So, exactly which tactics are firms employing to foster this confidence — and are managers’ levels of optimism warranted?
According to the Index, more than two thirds (70 per cent) of businesses have moved to stave off the threat of the recession by introducing cost and overhead cutting programmes, with nearly half (47 per cent) opting to manage debt more rigorously. Meanwhile one in six, 16 per cent, have chosen to increase their prices.
And, the effects of these measures are clearly paying dividends as 33 per cent of firms are experiencing an increase in new customers while 32 per cent have seen lapsed customers returning, leading to 25 per cent of firms enjoying a rise in customer orders.
Historically during economic crisis points, those who are willing to innovate, strike out, take a risk and create new markets are more likely to reap the rewards. And Bibby Financial Services’ research bears this out, with one in six (16 per cent) businesses currently exploring overseas markets in search of new opportunities.
To support these activities, there has been an increase in the uptake of alternative business funding, with the latest figures from The Asset Based Finance Association (ABFA) showing a four per cent increase in the number of firms using invoice finance in Q2 2012 compared to Q2 2011. This news is likely to be welcomed by the Department of Business Innovation and Skills which has called for a new emphasis on the importance of such funding options for businesses in need of financial support. Encouragingly, ABFA also revealed this month that companies taking advantage of invoice finance saw an average four per cent increase in their sales year on year in Q2 2012.
There's no doubt this is a tough time for businesses in the UK. But companies which implement smart, robust commercial strategies, ensure the appropriate funding facilities are in place, demonstrate an ability to adapt to market conditions and remain positive, committed and brave are more likely to not only survive the recession but benefit from the upturn when it comes.