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New Year worries for UK SMEs

Economy - News

Wednesday, 09 January 2008

UK entrepreneurs are concerned for the future of their businesses but few have plans in place to deal with potential risks as 2008 approaches.

As the credit crunch takes further hold, new research from entrepreneur think tank the Tenon Forum reveals that four in 10 (38 per cent) SMEs do not have any plans in place to address business risks.

Talk of a recession

Entrepreneurs say the biggest threats to SME business in the next two years are competition (20 per cent), time and money necessary to deal with red tape (19 per cent) and the inability to hire the right people (19 per cent).

Difficulties generating new business and potential problems with securing finance are also likely to keep entrepreneurs awake at night, with 13 per cent citing these as the biggest risk for their business in 2008

The transportation sector appears the least concerned by talk of a recession. More than half (58 per cent) are unprepared for business risk, compared to 47 per cent of agricultural businesses and 38 per cent in the retail industry.

Entrepreneurs in the North of England and South West are most concerned about the impact of competing business (24 per cent), followed by London and the South East (22 per cent) and the Midlands (18 per cent).

Put robust plans in place

Andy Raynor, CEO of Tenon said that talk of recession is still prevalent, despite recent interest rate movements. He added that it was understandable that entrepreneurs at the helm of the UK’s SMEs were nervous about what 2008 will bring.

“Many of today’s owner-managers will not have experienced such a pronounced economic downturn before so it’s extremely important that they put robust plans in place now in the event of challenging times ahead. By taking some basic steps, entrepreneurs can help their business weather the storm,” Raynor said.

Tenon’s Top 10 Tips on how to recession-proof business are:

Have a “Plan B” – in case the business is hit by something unexpected, however positive things are;
Act, don’t wait for things to get bad before putting plans in place;
Cash is king: have the best cash management approach. It simple and is the most important part of the business;
Know where things are: make sure financial records are robust and up to date;
Have the best possible relationship with the bank. It is essential they are fully aware of the business’ financial situation;
Take a new approach to tax. Question what can be done to improve tax cash flow and ease payments and consult an adviser;
Even if demand is slow, always be in control of costs. Know which are variable, can be acted on and how;
Rehearse the most difficult conversations that may need to be had with suppliers, clients, customers, employees and financiers should the worst happen;
Check employment terms and recognise who are the essential members of the team;
Price properly. Don’t over-react to market conditions, understand whether demand is price-sensitive and don’t give profits away.

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