What’s going to be on SME owners’ minds in the next 12 months?  

As we go into the new financial year, Andrea Reynolds looks at the issues affecting businesses - and how SME owners should respond

What’s going to be on SME owners’ minds in the next 12 months

As we go into the new financial year, it’s tempting to emotionally hit the ‘reset’ button: all those accounts done, the figures all logged and a focus on the future are all begging us to look forwards not back. But when it comes to the big issues affecting Britain’s SMEs, many of tomorrow’s problems have their roots in the past.

In this month’s column, I’m going to look at what business owners can do now to keep themselves on course for a successful year ahead. 

What issues are here to stay? 

The year ahead is likely to be one of big changes, but we’ll be carrying over a few issues that will make the business landscape challenging. 

High inflation: Inflation has been at the heart of the government’s economic policy with the Chancellor promising to bring this down after last year’s highs. Inflation can be volatile, however, so there are no promises that this won’t go up again in the next 12 months. 

Prices in the UK rose by 3.4 percent in the year to February 2024, the lowest rate since September 2021. After a steep climb in prices, consumers are getting very price sensitive and business owners are finding margins squeezed as they try to be competitive. 

Solution: If customers won’t pay more, look for ways to invest in efficiency. This won’t work for every business, but every business has processes; if you can make these more efficient, you could increase your margin by lowering your costs rather than putting up the prices for your customers. 

Rising interest rates: The Bank of England recently held interest rates at 5.25 percent, the highest in 16 years. Further increases could make borrowing more expensive for SMEs, hindering investment and growth.

Solution: If you need to borrow, borrow smart. There are so many innovative borrowing products on the market available now to SMEs. At Swoop, the ones we’ve found most useful are Merchant Cash Advances (MCAs) which you borrow at a flat rate and pay back as a percentage of your credit card receipts and InstantVAT Faster Refunds. This product gives you an almost immediate advance on your VAT refund so that you don’t have to wait for HMRC to send you the payment for a flat fee of just two percent. 

Supply chain disruptions: Global supply chain issues persist, causing difficulties in obtaining materials and leading to delays and price fluctuations.

Solution: We have hopefully seen the worst of supply chain disruptions but disruption is a fact of life in our “just-in-time” world. Businesses should always be ready to respond fast to disruption: that doesn’t mean you should be sitting on a pile of money (I’m a great believer in putting your capital to work wherever possible). The question you need to ask yourself is: if the worst should happen and I needed to find funding fast, where would I go? Having a contingency plan can buy you restful nights while your competitors are up late wishing they’d thought about this stuff earlier… 

Labour shortages: The UK faces a labour shortage, making it challenging for SMEs to find and retain skilled employees. This can lead to wage pressures and operational difficulties.

Solution: Investing in your people is something that doesn’t have to be expensive: things such as training, especially in emerging technologies such as generative AI and automation could quickly repay the investment as well as giving your staff a reminder that they have a future with a company that’s willing to develop their skills. 

Another way to make the most out of your people is to be flexible in how people work: remote and flexible working make a huge difference to parents and those with caring responsibilities. 

The biggest motivator for staff is not money – it’s feeling involved in decisions about how a business is run. And the last time I checked, acknowledging great ideas and saying “thank you” cost nothing. This is where an SME can be streets ahead of their larger competitors.

Remember that to recruit a new member of staff is almost always more expensive than retaining an existing one, so think about how you can make changes with the people you already have before you start firing and hiring.  

Cybersecurity threats: Cyberattacks are a growing threat for businesses of all sizes. SMEs might be particularly vulnerable due to limited resources for cybersecurity measures.

Solution: Insurance for cyber attack is a must-have for businesses. There’s also a strong case for checking that the security measures you have in place are fit for purpose. 

Remember! 60 percent of data breaches are caused by internal threats, so one of the fastest, most effective ways to become more secure is to ensure that your internal security processes are robust. No sharing memory sticks and using personal accounts!

Post-Brexit landscape: The full impact of Brexit on trade and regulations for SMEs is still being felt. Businesses will need to adapt to any ongoing changes.

Solution: Small businesses facing Brexit uncertainty can navigate the next year by focusing on flexibility and resilience. Prioritise adaptable strategies, diversify your supply chains and stay informed on evolving regulations to ensure you can adjust quickly to any changes that arise.

Looking ahead to 24/25

As a business owner. you should accept that you can’t predict which change will be the one that trips you up. Building-in resilience, agility and plan Bs is essential to long term success because the longer you stick around, the more exposure to risk you’ll have to endure.

That said, a few principles remain true: the more solid your foundations, the better you’ll weather storms so ask yourself not just how you’ll find the costs to run your business, but also where you will invest to make your business stronger in the long term. With energy price volatility and new regulations around sustainability, that might mean investing in solar panels. Or you might see opportunities in emerging technologies such as AI that could open up new avenues of income for you. Whether you’re upskilling your workforce or buying new machinery, the thriving business of tomorrow is the one that knows where their funding is coming from today. 

Andrea Reynolds
Andrea Reynolds

Share via
Copy link