The Importance of Small Businesses - small businesses are the lifeblood of any economy, generating wealth and employment for millions of people. History has proven that the greater the number of entrepreneurial small businesses that exist within an economy, the higher the Gross Domestic Product (GDP) of that economy becomes. The UK is now a service led economy. In the UK alone, there are 4.5m small and medium sized enterprises (SME), and an incredible 2.1m of those are based at home. SME firms employ nearly half the UK workforce and accounts for 40% of the UK's turnover. The European Union defines a 'small firm' as one with sales turnover less than £5.6 million, while a 'medium sized' enterprise, is one with sales less than £22.8 million. To promote the commercial success of these small organisations, business associations, business networks and lobbying groups, provide a valuable voice, on behalf of business owners.
What are Small Business Services? - Millions of small firms provide thousands of different types of small business services. This 'services sector' generally, contributes three-quarters of the UK GDP. Most small firms provide invaluable 'business to business' support for larger business customers, while others deliver services directly to consumers. Small firms are predominantly formed as a sole trader, limited liability company or partnership. The main market sectors they operate in are; industrial trade and repair, business finance, consultancy, accountancy, sales and marketing, office services, IT support, legal advice, recruitment and retail based services.
Becoming Self Employed - most entrepreneurs start their business in order to take control of their own destiny and capitalise on their established skills and experience. Yet talent is not enough. Entrepreneurs need a sound business plan, complete personal commitment, the ability to work hard, and adapt when times become tough. Business owners also have to spend time and money learning and dealing with the laws and regulations that impact day to day activities. Unfortunately, a certain proportion of business start-ups fail within the first few years of trading, because of poor business planning, lack of pay during the early years, lack of accounting controls, bad debts, fierce competition and poor sales and marketing strategy. Too many business owners concentrate on selling, without bothering to forecast cash flow problems (such as unforeseen expenses or bad debt). As the economic conditions worsen, the number of business failures is predicted to rise...
Surviving the Boom and Bust Cycles - during economic boom times, there has been an explosion in the number of people leaving full time employment and setting up on their own. Many entrepreneurs formed a company, with a dream and a business idea. However, during the recent recessionary cycle, business confidence has been destroyed, and larger companies have cut back their operating expenditures (OPEX). This greatly impacts the small firms whose survival depends upon selling the business services to their larger business clients. Cashflow and margins are coming under intense pressure. In addition, small businesses have had to differentiate their proposition (to compete more effectively), as well as plan for falling sales. Many are freezing recruitment, shedding staff, cutting advertising costs and long term business investments, in order to offer their customers an attractive price for their business services.
Accessing Business Finance - traditionally most small and medium sized businesses are generally underfunded, and do not have the professional management resources of large corporate organisations. Despite this, small businesses historically had little trouble in obtaining huge amounts of credit during the boom years. They became highly geared, capable of investing and growing, using their credit facilities. Credit providers scrambled to offer cheap bank loans, extended overdrafts, credit cards, unsecured loans, trade credit and secured loans. In the boom years, some entrepreneurs were more prudent and relied less on credit, instead choosing to take advantage of free business grant facilities, offered by Governments. As personal, business and Government debt mountains exploded over the years, eventually the world woke up to the scale of bad debt. The subsequent Global liquidity crisis (or 'credit crunch' as it has become known), now means small firms struggle to access credit. This is prohibiting business investment in ongoing activities. Accessing credit is the now the number one challenge for owners of small firms.