Controlling fixed costs is the number one objective for small business looking to secure growth in the year ahead – and there is an upturn in the proportion of SMEs planning to expand their workforce in 2017 – according to new research by Hitachi Capital Business Finance.
At a time when the rise in electricity prices is thought to be the largest since 2008 and when many businesses are adapting to the impact of exchange rates on imports and the new business rates, the British Business Barometer underlines the importance SMEs place on cost control in order to maintain a competitive position and keep their business plans on track.
Small business decision-makers polled by Hitachi Capital Business Finance identify a number of initiatives to help them achieve growth in the months ahead. Following moves to keep costs down, other key priorities comprised of: improving cash flow, expanding to new markets and hiring new people.
The top initiatives for businesses that expect to see organic growth over the next three months after keeping fixed costs down (39 per cent), focus on hiring new people (27 per cent) and expanding into new markets (25 per cent).
SMEs fearing business contraction in the next three months place greater emphasis on keeping their fixed costs down (42 per cent), expanding into new markets or overseas (23 per cent) and reassessing finance commitments (16 per cent).
Comparing businesses that are expecting organic growth with those fearing business contraction in the next three months, significantly, it is a greater priority for SMEs which are planning to grow to improve their cash flow than those whose business is contracting. Arguably, the businesses that are scaling down are in greater need of financial prudence to transform their fortunes.
The least appealing move for SMEs to enhance business growth was the securing of financing by way of replacing vital business assets (2 per cent).
Moreover, welcome news for the economy at large as 17 per cent of UK SMEs are looking to employ more staff in the next three months (versus 13 per cent in July 2016), underlining the sectors importance for employment and training. Businesses most likely to be hiring before the end of April are those based in London (27 per cent) and the North West (19 per cent).
Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance comments, ‘Most of the growth initiatives mentioned by small businesses related to money – cutting costs, improving cash flow or being stricter with getting paid on time. Given this, it does come as something of a surprise that so few SMEs are actively shopping around for different funding options.
‘The recent UK government move to compel banks to refer consumers to lending platforms highlights this broader issue of choice. SMEs should be more aware of the alternatives open to them. For example, around seven in ten small businesses are not aware of asset finance as a tailored and competitive finance option which is clearly reflected by the very small number of businesses looking specifically to secure finance for a vital business asset.
‘At Hitachi Capital Business Finance, we are launching a number of education initiatives to help raise SME awareness on the full range of funding products available, so more ventures can get the right backing they need – when they need it – to power their business forward.’
Further reading on growth
Nominations are now open for the British Small Business Awards 2017, the leading event celebrating the brightest stars in the SME sector. Click here to enter, and make sure you get involved today using the hashtag #BSBAwards. Good luck!