No longer are the UK’s small businesses seen as a nation of shopkeepers, but instead as international companies – and rightly so. The globalisation of business provides a wealth of opportunities for all companies and in particular small and medium-sized enterprises (SMEs).
Our recent research, The New Internationals, shows that SMEs with a ‘local mindset’ are limiting the opportunities readily available to them by underestimating the global nature of doing business in the 21st Century. Four fifths (79%) of SME owners believe that global expansion is vital to the success of their business, however three quarters (75%) say they need more help from the Government to achieve this.
Against a picture of continued austerity in the UK, the Government reaffirmed its commitment to reduce costs and promote opportunities for SMEs in the recent Autumn Statement. Chancellor George Osborne set out a number of initiatives to help SMEs capitalise on the benefits of the UK’s growing economy, including giving local authorities the power to set their own business rates to help SMEs keep costs down.
This is encouraging news. According to our study, two-thirds (67%) of SME owners believe the UK Government’s support is improving. However, 62% also believe that they are being held back by red tape, and more than half (55%) would like more help dealing with the uncertainty around the potential scenario of the UK leaving the EU.
In recent years, UK SMEs have extended their business footprint beyond Britain, as European companies have been incentivised to trade with each other. As a result, importing and exporting is becoming much easier for smaller businesses – and these international growth opportunities originate from many regions beyond Europe. Despite this, four fifths (82%) of SME leaders admit they are more concerned about managing local risks than global threats, while three quarters (71%) believe they are disproportionately affected by global risks compared to larger organisations.
Without realising it, the majority of small businesses are international by default – for example, through their online and website presence or overseas supply chain partners. A failure to recognise their global footprint could mean that their risk management plans fall short. Our study found that nearly a third (29%) of SMEs have suffered a risk as a result of operating internationally, including cyber crime, banking fraud and IP infringement. With 77% of SMEs in the UK planning to increase their international footprint in the future, these incidents are also likely to increase.
It’s vital that SMEs take ownership of their own international growth opportunities and manage their risks appropriately. Here are our top tips to help SMEs achieve and succeed in their ambitions:
- Know your supply chain: Understanding where your supply chain reaches to will help you manage not only your costs but also any risks. Keeping an updated list of overseas partners, offices and employees will help you adapt to any changes to the market, ensuring you remain competitive. It will also be vital in managing any risks that might occur.
- Plan for success, prepare to fail: Create a business continuity plan. As part of this plan you should list all of the services you provide and use, and also the parts of the business you can’t operate without. This might include stock, premises and employees. For an SME, a minor disruption can cause a disproportionate impact, so planning for all eventualities will help you get back on your feet should the worst happen.
- You are not alone: There are a number of places to look for help. The Government offers a wealth of information and support through the UKTI adviser’s service. In addition, there are industry bodies such as the Federation of Small Businesses, the CBI and other SMEs who are there to offer sound advice and a helping hand. Remember you are not alone and that it’s important to reach out for help.
Taking calculated risks and recognising opportunities is how SMEs grow and prosper. But it’s how they plan for these risks that determines how successful they will be in achieving their ambitions. The improving economy and new international opportunities available present a real chance for small companies to thrive, but recognising the international threats posed is the first step.
By David Swigciski, SME Trading Director at RSA