SME growth ambitions hindered by narrow financial focus
Almost 71% small UK businesses see better management of financials as key to future growth, at the expense of innovation, improvements and investing in the future according to quarterly research from Hitachi Capital’s British Business Barometer.
With companies restrained by red tape and regulation and stifled by the fixed costs usually associated with the nuts and bolts of running a business, the research highlights the fact that too narrow a focus on financial objectives may also be a factor in limiting their growth. A stronger focus on investing in the future of the business and innovation, both of which are very low in comparison (17% and 37%), would perhaps help businesses achieve growth over the longer term – but of course those aspects tend to take a back seat to day to day survival in periods of economic uncertainty.
However, and hopefully as a pointer to increasing business confidence and businesses regaining an entrepreneurial outlook, Q1 this year has seen a slight shift in focus for growth, indicating perhaps that small businesses are feeling more positive about the future with an increased focus since Q4 2014 on hiring more people (16%) and investing in new equipment for the business (13%). Perhaps in an acknowledgement of long-term sustainability and lessons learned over the last few years prudence is still very much in favour with the majority of companies still predominantly concerned with keeping better control over fixed costs and managing cash flow than any other area, when comparing the figures quarter on quarter.
The research from Hitachi Capital Business Finance’s quarterly British Business Barometer, asked 1,000 small businesses in the UK, asked what businesses are doing to try and achieve business growth in the next three months compared with Q4 2014.
What businesses are doing to achieve growth over next three months
By sector
By industry sector and region, keeping fixed cost down was the biggest priority, although looking closer at the industry sector, each had their own particular focus area for achieving growth:
· Manufacturing: Growth in this sector will be driven by investing in the future, with the biggest change on last quarter in manufacturing companies focusing on hiring new people (26% vs only 15% in Q4 2014) and streamlining the supply chain (12% vs 8% (q4)).
· Construction: Transportation and Distribution: Keeping fixed costs down is key to growth and is the biggest focus for the next three months, with improving cashflow less of an issue than last quarter (14% vs 25% Q4).
· Agriculture: There are significant changes in the key triggers for growth among this sector in Q1 compared with Q4 last year. While keeping an eye on fixed costs, there has been a shift in focus, with small businesses more likely to invest in new equipment for the business (21%) than in Q4 2014 (15%).
Gavin Wraith-Carter, general manager at Hitachi Capital Business Finance said: “As the research states, the management of financial affairs is always the most critical role – and arguably becomes even more so when businesses are coming out of a recession mindset and opportunities start to resurface. However, in order to achieve and sustain growth over the longer term, it is obviously essential to recognise the need for ongoing investment. We understand that the prospect of finding additional funding for things such as new equipment or machinery can be daunting, but funders like Hitachi are here to provide alternative and manageable financing solutions to businesses. We ensure that we work closely with all our intermediaries to offer options tailored to meet their customer’s needs, and we are continuously investing in and evolving our offering in order to support businesses to achieve their growth ambitions.”