The rules of doing business have changed, but are SME owners ready for the challenges that lie ahead? Research by accountancy firm, Menzies LLP, reveals that SME owners are focused on what they need to do but there are signs that some could be working too hard or failing to seek the mentoring and specialist support needed to succeed in turbulent times.
Based on a survey of 1,003 SME owners in the UK, exactly three-quarters of respondents said the rules of doing business have changed significantly in the past year and Brexit and other uncertainties mean they were likely to keep changing.
The higher the business turnover, the more likely respondents were to agree that the rules of doing business had changed - 91 per cent of businesses with a turnover between £1-10m and 93 per cent of those with a turnover between £10-50m shared this view.
Of the SMEs that believe the rules of doing business have changed, the main observation is that competitor activity has become more intense and there is a constant need to ‘stay one step ahead’ (43 per cent). Other key observations include a belief that important business decisions have become data-driven (39 per cent) and a need to keep track of regulatory changes (38 per cent). Smaller businesses, with fewer than 50 employees believe the most significant changes over the past year are increased competitor activity and a shifting regulatory outlook, whereas larger businesses, with more than 50 employees, believe that business decisions are more data driven and there is less time to weigh up the pros and cons. Start-up businesses are also aware that business decisions have become more data driven over the past year.
Julie Adams, senior partner at accountancy firm, Menzies LLP, said: “Small and medium-sized businesses have a much closer understanding than multinationals of how the rules of doing business have changed. This awareness combined with their size and agility has enabled many of them to adjust to the uncertain market conditions. The research shows that larger SMEs that employ more than 50 staff are acutely aware of the need to react to changes in market demand and make business decisions more quickly. For many, the ability to lay their hands on reliable and up-to-date data in a format that is tailored to the operational needs of the business is now critical.”
With more changes on the agenda, the majority of SME owners (88 per cent) know they could be facing diverse risks in the year ahead and the biggest challenge will be predicting future market demand. The top five risk factors identified by SME owners were cash flow difficulties; geopolitical uncertainty; breaks in supply; a lack of resources (management time and skilled people) and difficulties accessing finance. The owners of start-up businesses (those that have been trading for less than two years) believe ‘cash flow difficulties’ are twice as likely as any other risk factor to impact their trading performance in the year ahead. Only 9 per cent of start-up businesses believe there is no obvious risk to their business model in the year ahead.
Proving that they are ready for the choppy waters that lie ahead, SME owners appear to be very focused on the things that are important to the success of their business, possibly to the detriment of their personal lives. The majority of SME owners said their top priority is ‘delivering a good quality product or service’. There were some age-related differences - SME owners aged under 40 stated that managing costs efficiently and delivering a quality product or service were their top priorities, whereas the over 40s put delivering a quality product or service and personal enjoyment top of the list. Regardless of age, SME owners agreed that spending quality time with family and friends is not as important as running a successful business.
The majority of SME owners (53 per cent) claim to be happy with their work life balance., However, on closer questioning, the picture is more ambiguous. A third (37 per cent) of SME owners admitted finding it difficult to switch off and enjoy their downtime and one in five (20 per cent) described their work life balance as ‘out of control’. Worryingly, a quarter of the latter didn’t think this was a problem.
Julie Adams, senior partner at accountancy firm, Menzies LLP, said: “SME owners seem broadly happy with their work life balance but the findings show that their priorities are skewed towards their professional lives and some are struggling to find time to relax away from the business. Whilst staying focused is important, the most successful entrepreneurs tend to be those with a more rounded approach to life who understand what they are doing it for and plan their futures on this basis. In uncertain times, SME owners need to do more, not less, of this type of forward thinking and keep their plans under review.”
There are other indications that SME owners may be feeling stretched and lack the support they need to realise their business potential. The majority of SME owners (64 per cent) report that they lack access to support and feel they are running their business alone, on average, more than twice a week. More than one in 10 (11 per cent) SME owners reported feeling a lack of support at least once a day. Early stage businesses (2-10 years), but not start-ups, are most likely to report feeling alone when running their business and those that have been trading for longer than a decade are least likely to feel they lack support.
“The research shows that there is a gap when it comes to the support available to UK SMEs. Whereas start ups and more mature businesses are finding the support they need, some early stage businesses could be falling in the gap. Better signposting to mentoring and other business support services may be required,” added Julie Adams.