SME growth is essential to Great Britain. There were 5.7 million SMEs in the UK in 2018. They account for 99 per cent of the UK’s businesses.
Economic growth in the UK is in the hands of the many small and medium-sized enterprises. SMEs want to grow and overall many are doing well. Some are skyrocketing. But, largely as a result of Brexit uncertainty, some businesses are struggling or putting the brakes on growth.
So, what distinguishes the SMEs that, despite uncertain times, are still managing to achieve rapid growth?
All businesses face barriers and challenges that can prevent growth and hold them back. Understanding them and knowing what enables a small business to grow is a vital component of success.
Here are the top 4 growth enablers every SME should know.
1. Business owner vision
Vision is one of the most important drivers of business growth. Without vision and passion, it is impossible to grow a business. SME leader and co-owner of Artemis Marketing, Mike Knivett, says “We have achieved rapid growth despite Brexit uncertainty. I believe we have achieved this by constantly thinking ahead, and anticipating and evaluating potential barriers to growth. It also comes down to business agility.”
As the previous owner of several businesses, Knivett is keen to impress that growing a business is really hard. He says “Focusing on where the business is heading and not on the day-to-day is key.
“How do we do that? We have invested in an amazing operations director who takes care of the day-to-day so I don’t have to be involved in that. My head is on sales and defining a clear vision for the business. I also have a business coach. It is a business strategy that is working.”
Guidance and mentorship are key and can make a huge difference to the growth trajectory of any small business. There are already some successful business-led mentoring schemes out there to help small businesses grow. it is clear that leadership development should be at the heart of business strategy.
Vision is a key growth enabler.
2. Culture and employee engagement
In a paper published by The London School of Economics on ‘Unlocking SME Productivity’, poor management practices are called out as one of the biggest obstacles to SME growth.
Research indicates that management practices could account for around 55 per cent of the productivity gap between the UK and the US. Better management practices can enhance operational efficiency and increase productivity.
Organisations must understand and interact appropriately with their stakeholders, from the workforce to trade partners, founders and the community in which they operate. Business culture has a strong link to productivity.
A study by economists at the University of Warwick found that happiness led to a 12 percent spike in productivity, while unhappy workers were 10 percent less productive. Employee engagement can make a huge difference to the outcome of any business.
A strong business culture is a growth enabler. With the right talent, engaged employees, low staff turnover and a culture where ideas are shared and staff are given the opportunity to grow and develop, innovation happens and the business succeeds.
3. The external environment
The cultural, political and economic conditions of the UK, as well as economic conditions at the regional and local levels can be growth enablers or growth inhibitors for businesses, no matter what their size.
Brexit uncertainty is currently a key inhibitor for many of the UK’s SMEs – uncertainty isn’t boding well. Earlier this year, one third of the UK’s SMEs cited Brexit as a reason to delay growth and investment.
Dun & Bradstreet warn in their latest report on Brexit and UK SMEs that the health of our small businesses will be critical to the country’s future. The good news is many SMEs aren’t saying they can’t grow – just that some are delaying investment.
On a more positive note, Tony Price, PwC UK Partner, says in a paper on how SMEs are looking to post-Brexit opportunities, “The level of confidence in new opportunities in new post-EU markets is encouraging, but companies need to have the confidence in their data in order to make informed choices at pace.
“History has taught us that UK business is adaptable and innovative when confronted with new challenges and opportunities.
“It is precisely this adaptable spirit, combined with foresight and planning which will allow the businesses to weather the storm – and indeed thrive.”
Finance is critical for enabling small and medium-sized businesses to grow.
Boost Capital report that despite the uncertainty in the economy SMEs want to grow – in fact 45 per cent of SMEs plan to grow in the next 12 months – but although there is appetite for growth many businesses lack the funding to do so.
Lending to SMEs in the UK has declined – The Credit Protection Association report that bank lending to SMEs has declined by 3 per cent since 2015.
But, as Boost Capital explains, there are behavioral barriers linked to the failure of securing capital – these, they say, are:
- A lack of awareness of funding sources
- A lack of financial expertise to assess alternative funding sources
- A lack of confidence in the ability to secure funding
Businesses are, however, being rewarded for innovation (R&D Tax Credits) and there are many schemes out there to help smaller companies get their foot firmly on the growth ladder.
The government has put research and development (R&D) at the heart of its Industrial Strategy, aiming to increase R&D expenditure to 2.4 per cent of GDP by 2027.
The government is providing growth opportunities to SMEs in a number of ways, including offering help to raise investment for growth through the government owned British Business Bank and subsidiary Start Up Loans.
There is little doubt that Brexit uncertainty is posing a considerable challenge for the UK’s SMEs. There are though signs that a significant number of SME leaders are positive about new opportunities for growth and more than half of SMEs still believe the UK is a great place to start and grow a business.
2020 will be a crucial year for the UK and for SMEs. It will be up to business leaders and government to ensure SMEs are equipped to deal with the challenges ahead.