After a long economic winter of high inflation, flatlining growth and persistent labor shortages, Britain’s small business community is looking ahead to the remainder of 2023 with a certain degree of optimism.
But – and this is quite a big but – the tough trading conditions that have characterized the U.K. economy since the beginning of the Covid pandemic have left scars. Entrepreneurs may be looking forward to better times but many of them are also struggling with confidence issues. In practical terms, spending on marketing, recruitment and digital skills has been pared back or suspended by some businesses. And according to a new report published by Small Business Britain in collaboration with Clearpay and Square, this could impair future growth.
The report is based on responses from around 1,000 small businesses across the United Kingdom. More than half are one-person bands and around 35% have 2-9 people on their payrolls. Only a handful have more than 40 people working for them. In other words, the survey was aiming to tap into the sentiment of those companies that are often described as the “backbone” of the U.K. economy while receiving relatively little attention.
At first glance, the outlook for these companies seems relatively positive, with just over 61 per cent expecting to grow in 2023.
But the devil is in the detail. For consumer-facing businesses, Christmas is a crucial time of the year. But for many, the 2022 festive season – the first of the post-Covid era – was a disappointment. Ten percent reported poor trading and more than 30 percent said it was not as good as usual. Companies that can ramp up revenues in November and December are much better equipped to deal with difficult conditions in the year ahead. Poor Christmas sales remove an important cushion.
Storing Up Trouble
But the report’s authors are more concerned about a downturn in investment. Almost a third of businesses have delayed marketing spend and 27 per cent have cut it. Hiring has also slowed.
So are Britain’s small businesses storing up trouble for the future? Small Business Britain was established to be a champion and voice for small businesses. I spoke to founder Michelle Ovens, CBE. firstly asking how she would sum up the mood of the companies taking part in the survey.
“There is a general consensus that conditions are tough, but they are pressing on anyway,” she says. “Everyone feels how tough it is, but there are signs of optimism.”
But Ovens expresses says cuts in marketing could well be an own goal.. “You cannot stop marketing,” she says.
True, but it’s perhaps understandable that some businesses – actually quite a few – have looked at the trading conditions they face and concluded that spending needs to be reduced, with marketing as an obvious contender. Unlike wages or other fixed costs, it is something you can flex up and down.
That’s something Ovens acknowledges but she urges cash-strapped small ventures to consider how marketing can be done more cost-effectively. “Companies can invest time rather than cash,” she says.
One way to do that is to turn to digital technology – social media being a case in point – to reach customers without having to spend huge amounts on advertising or traditional marketing campaigns.
But the survey also detected cutbacks in the willingness of business owners to invest in getting to grips with digital tools. That’s not necessarily a problem if you are already – for example – a bit of a whiz kid when it comes to social media engagement or making short films for Tik Tok – but not everyone is. Ovens says business owners need to brush up on their own digital skills: “Many entrepreneurs’ digital skills were frozen in time when they left their previous employment to set up a business.”
Ovens stresses adopting digital technologies – and not just in marketing – doesn’t have to be expensive. There is cheap or free software and online courses available. But it does require commitment and time.
And it’s not, as she acknowledges, a silver bullet. TikTok videos or a Facebook campaign won’t work for everyone. “But we would urge people to give it a go,” says Ovens. The results can be impressive.
A Confidence Deficit
Perhaps the bigger issue here is confidence. If a business has been bruised and battered by a combination of Covid, inflation and consumer belt-tightening, owners can lose faith in their own ability to make sales or even good decisions. Ovens says there is a danger that when decisions are made, the driver is panic rather than good strategic thinking.
And confidence can be a fleeting thing. Hard won and easily lost in the face of adversity. “I hear people saying things like “I have lost my mojo,” says Ovens. “But we’re talking about people and we all have our moments.”
So, what is to be done? Ovens recommends seeking out a mentor. Equally important, finding a “tribe” can also be helpful. Other business owners and advisers who can provide mutual support and trade information. More fundamentally, even taking a break can be helpful. Going for a walk or taking time out to consider the bigger picture.
The report also recommends taking steps to build resilience, with the creation of a new business plan a good first step.
The optimism – albeit self-declared – among small businesses is good news but with trading conditions still tough, many will focus on day-to-day survival rather than long-term growth planning. That could create problems further down the line.