Halloween is everywhere you look, with retail shops, restaurants, and high street businesses covered in cobwebs, spiders, and similarly spooky stuff for much of October. While the October 31 event may conjure up frightful visions of ghouls and ghosts for many, small and medium companies have greater fears to face – and all year around. Things going bump in the night are the least of the average business owner’s worries. But, some classic concerns do keep many SMEs awake in the wee small hours.
Small business bosses are always overstretched, but many are too scared to hire any help. Of course, there’s the cost involved in recruiting employees, with the obligation to pay National Insurance for staff members, as well as the need to make contributions towards workers’ pensions. Employers with between 30 and 49 employees have had to pay into staff pensions since the beginning of the month, and even the smallest firms will have to fall into line with new auto-enrolment plans by 2018. The Government is running an advertising campaign portraying the workplace pensions issue as a large blue monster that businesses shouldn’t ignore, and the Pensions Regulator also has a resource for small businesses to check they’re compliant.
Another worry is the forthcoming National Living Wage. More than half of small firms plan to put off hiring new staff as a result of the new pay rules, research from the Federation of Small Businesses (FSB) shows, while four out of ten will reduce employee hours, and almost a third will cut their headcount.
Other business owners fret about being exposed to an employment tribunal if they have a disagreement with a disgruntled employee. And there are risks to employing people, but the cost of not hiring can also be great. One person can only do so much, and without extra manpower you may lose business. Also, staff aren’t just there to do the drudge work – they’re the real talent of tomorrow. Smart SMEs will be recruiting bright, young recruits now to keep abreast with their competition, and training youngsters up to be the key figures in their bigger, better business of the future.
But is bigger always better? Many bosses are fearful of growing to a point where their company becomes something they no longer recognise, entirely control, or feel passionate about. However, there’s the danger SMEs that don’t develop can stagnate, and be overtaken by more ambitious rivals. Plus, growth needn’t be a reason for anxiety if infrastructure and management are put in place so processes still run smoothly. Some growing pains are inevitable, but with a well-considered business plan they should be kept to a minimum. In particular, previous Government research into how to grow comfortably suggests employing technology to innovate, find new customers, and raise growth capital. The report also advises using outsourcing to keep costs down, while still being able to grow at a sensible rate.
Consider whether you really have the appetite for growing your firm, and, if not, how you can stay healthy, while remaining at a manageable size. If you do want to expand, think about how your role as boss might change if your company were to increase in scale, and what other skills you might need to bring in. Finally, always take advice from seasoned professionals, such as an accountant or a business consultant, before embarking on any expansion plans. They should help you make the right decision.
The greatest fear of all for some business owners is the idea of being in debt, as we discussed recently on this blog. As many as one in two SMEs is classified as a ‘permanent non-borrower’ according to the most recent SME Finance Monitor, meaning they never take out any borrowing because they’re scared of losing control of their business. Of those who are willing to borrow, many still prefer to rely on friends and family – more than four out of ten SMEs formed since 2010 would turn first to relations and acquaintances for business investment, according to new Business Banking Insight findings made for the FSB, compared with just over a third who would consider peer-to-peer loans, for example.
Ironically, these timorous souls may think they’re protecting their enterprise, but, in fact, they’re potentially putting their operation at risk. Under-capitalised businesses are not only less likely to grow, they can even struggle to cover standard, day-to-day expenses, and be in greater danger of going bust. Plus, businesses with any ambitions to grow must accept the fact that growth typically results in a greater finance requirement. That investment has to come from somewhere, and without personal savings or money from nearest and dearest, most entrepreneurs will have to look to a lender of some sort. The good news is there’s more choice today than ever before for business owners, from traditional bank funding through to asset finance and more innovative types of products from alternative lenders, such as unsecured business loans, crowdfunding, and peer-to-peer lending.
So, this Halloween, identify your greatest fears, and face your worries head-on. You never know, you might find your imagined bogeyman is in fact the key to helping your enterprise reach the next level of growth, development, and success.