Key issues facing SMEs in 2018, and to to overcome them
SMEs are, and always will be, the backbone of every economy in Europe. The UK is no exception. In fact, in 2016, official records show that there were 5.4 million SMEs in Britain – representing 99% of all businesses. As generators of substantial income, employment, outputs, innovation and new technologies, their importance is beyond question.
And if you number yourself amongst this influential sector – then we salute you!
But we are also acutely aware that, as 2018 looms ever closer on the horizon, for SMEs, the New Year skies could bring turbulent conditions.
Key issues facing SMEs in 2018 include:
- Whether we like it or not, Brexit isn’t going away and is likely to fuel even greater political uncertainty in the next 12 months. This has a direct impact on consumer confidence.
- UK Inflation is on the march, recently hitting its highest level in more than five years and is now at a higher rate than all the world’s top economies, according to the Organisation for Economic Cooperation and Development (OECD). This is putting the squeeze on living standards.
- Interest rates have risen recently – and could well increase again in 2018. This means the cost of borrowing is likely to go up.
- Business rate increases next April, totalling £152m, will hit more than 56,000 small businesses in England, according to research by rates specialists, CVS.
- It may become harder to source finance and funding whilst sustaining growth could become ever more challenging.
- As debtors take longer to pay and suppliers put the squeeze on payment terms, this could trigger cash flow issues.
So what can SMEs do if they are struggling financially? How will it be possible to achieve financial stability and growth – despite these extraneous events, which are largely out of their hands?
Identify the challenges and implement a clear strategy
Don’t let things fester. If you can see trouble ahead in terms of cash flow or over capacity, be ahead of the game. Failing to plan is planning to fail. You may be surprised, even perplexed by the number of options available. Don’t be short sighted and only cover the immediate crisis, better to have a flexible option, one that is there as and when you need it, do not commit security to a one off solution and potentially restrict options in the future. So, work with your accountant/Advisor they should have at least half an eye on the medium and long term in terms of the support your business might need. A structured facility incorporating all assets may prove the most holistic solution and one easier to exit. So whatever reason – address the issues sooner rather than later
Remember, if the business is already struggling to meet standard business expenses, or meet a tax demand, then it might be a little late in the day to be seeking help. Financiers are more likely to assist before the problem has become too acute. The healthier your position, the stronger your negotiating. Plug the gap before it becomes a gaping hole.
Keep cash flow in check
This will allow you to maintain turnover – but also enable you to fund growth in the longer term. If you go to the bank or a non-traditional lender for turnaround finance, make sure you find out what products and services they can offer you, so that you can make an informed decision about what would be best for your business.
Say no to unnecessary purchases
Is it absolutely necessary to invest in capital equipment – or will the current infrastructure do the job perfectly well? It can be tempting to splash the cash, but being extravagant may not always be a good policy. No one is encouraging meanness, but think before you spend.
Only keep staff who are necessary to the business
It may sound mercenary, but when times are tough, there really is no justification for deadwood. Businesses exist and flourish to make money, not for the sake of keeping people in employment. Of course, if you have young staff with potential and you have already spent money on training, then you’ll want to ensure you get a return on your investment. But, if there are those who aren’t pulling their weight or justifying their salaries, then it may be better to have a parting of the ways.
Make sure your taxes are up to date
Don’t let tax get on top of you. It will catch up with you in the end and will have to be paid sooner or later.
Run a tight ship
In our experience, SMEs are amazing at what they do – they know their industry and markets intimately. But they often struggle at managing cash flow.
Instead of having funds set aside for growth, cash flow pressure can mean the business is continuously fire fighting to pay wages and meet payments. There really is no shame in running a tight ship. And don’t blow your funds on expensive accountants. There are plenty of affordable options out there.
Partner can help you turnaround a tricky situation
If you are struggling with existing or mounting debt, or you need additional finance for expansion, here at Partner we have access to a range of turnaround finance professionals and funders. We have a long record of success in helping SMEs getting back on track – and sowing the seeds for future growth.
Whether it’s Brexit, rising interest rates, booming business rates, or clients who are just taking too long to pay – it may seem like a minefield out there, but there is help at hand to prepare you for what may lie ahead in 2018.
Above all, trust in your instincts and never give up.
Some further options for finance to maintain cash flow and facilitate growth include: