The seemingly disparate challenges facing SMEs today require a common response - greater attention to the financial foundations on which their growth plans are built.
What stands between your business and its ambitions for growth over the next 12 months? Latest findings from the Close Brothers Business Barometer – a survey canvassing the opinion of SME owners and managers across the UK and Ireland - suggest SMEs perceive at least three major barriers that threaten to hinder growth in the year ahead.
20% of SMEs said they see the prevailing economic conditions as their biggest barrier to growth. The same proportion are concerned with staving off competition in the marketplace while a third, equally-sized group of businesses are worried by financial constraints – specifically a lack of funds for investment in equipment, staff or marketing. These concerns reflect the wide range of challenges now facing small businesses.
In recent research published by the Forum of Private Business, more than 80% of small businesses argued that the tax burden – its complexity as much as its weight – was hampering their ability to grow. Such warnings are echoed by the Federation of Small Business which reports a widespread despondency, due in part to uncertainty about the global economy, but also to key changes in the UK, including the launch of the National Living Wage, auto-enrolment pensions and proposals for quarterly digital tax reporting for small businesses. All represent additional drains on resources.
How, then, do SMEs navigate their way through all of these issues? The first important point to consider is that the most pressing worries cited by business owner and managers’ in the Close Brothers Business Barometer are connected by one overarching theme - finance.
The right strategy for walking this tightrope is to be found in SMEs’ views on what constitutes their main business concerns. Along with the external threat of competition – the greatest business concern cited by 21% of SMEs in the latest Business Barometer – business owners and managers point to more internalised issues, including cash flow (17%), late payments (12%) and the need for extra working capital (10%). This suggests SMEs need to concentrate on ensuring their businesses sit on firmer financial foundations that will support their plans for growth. Only those with a strong balance sheet will be able to take on the competition whilst at the same time coping with trading volatility.
For many SMEs, therefore, the priority now should be to bolster finances. That may mean entering into discussions with your bank, but also considering a broader range of options - including the likes of invoice finance if growth, improved cash flow, late payments or cost efficiencies are on the list of business objectives. Look for solutions that suit the particular requirements of your business, including the need for flexibility in a fluid market environment.
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