Running a small business is full of opportunities. But it can be hard for business owners to always take them.
The day-to-day challenges that face the UK’s 5.8 million SMEs are stopping many of them from reaching their potential. So what are the limiting factors for these small businesses, and what can they do to try and overcome them?
Difficulty accessing funding
The first is related to funding. According to recent research by alternative business finance provider Nucleus Commercial Finance, 52 per cent of UK SME owners have business ambitions they feel they are unable to fund. The problem is most extreme in London, where 61 per cent are unable to access funds.
“If business owners cannot access the funds they need to achieve their strategic goals, we could see a significant impact on the UK’s economy if SMEs are held back,” Chirag Shah, Nucleus Commercial Finance chief executive, commented.
While the research found that SMEs have increased revenue and profit in the past year, many are reportedly struggling to achieve their strategic goals. These include brand, marketing or online presence, expanding across the UK, increasing headcount and launching a new product or service.
High-street banks are becoming less likely to lend to small businesses, so SMEs need to investigate other lending channels, including government schemes, innovative small-business lending and funding contests.
Skills in short supply
Another factor holding small businesses back is shortage of skills. The average UK SME faces a skills gap that will reduce total revenue by £145,000 over the next year, rising to £318,000 annually over the course of the next five years, according to research from recruitment company Robert Half.
According to Robert Half, the skills gap has widened as a result of macro challenges, including a shrinking talent pool due to Brexit, increased digitalisation and economic influences.
The skills gap is impacting the nation’s productivity, which is now the lowest among the G7 countries, as well as stifling innovation and preventing SMEs from entering new markets. Data analysis and digital skills – as well as softer skills such as resilience, adaptability to change and critical thinking – are all in limited supply.
Businesses need to address the skills gap by retaining good people and attracting new talent, with one approach being to improve the benefits they offer.
A lack of confidence
The current political and economic landscape in the UK – dominated by Brexit – has impacted confidence among small businesses.
The most recent Small Business Index, published by the Federation of Small Businesses (FSB) at the beginning of October, registered its fifth straight negative quarterly reading for first time in its nine-year history.
The FSB recently called on the Chancellor, Sajid Javid, to bring forward radical interventions to address the unprecedented long-term slump in small-business confidence, along with slowing economic growth and a widening trade deficit.
Writing to the Chancellor, the group called for a major reduction in business rates bills for small firms amid rising operating costs, along with increasing the Retail Discount – which allows small retailers with rateable values of up to £51,000 to claim a 33 per cent discount on their rates bills – to at least 50 per cent and extending it to small firms operating in other sectors.
This area is largely out of the control of small businesses themselves. But by being proactive in tackling the other two issues – funding access and skills shortages – SMEs stand a better chance of reaching their potential once the current period of uncertainty has been navigated.