Sunday, September 21, 2014

Small Business: How Do They Optimise Risk?

A recent survey by the Confederation of British Industry (CBI) highlights how small businesses in the UK have gone on their biggest hiring spree since records began a generation ago in 1988, with 24 per cent of companies saying they were increasing staff numbers. This is fuelled by booming domestic demand that has delivered a fourth consecutive quarter of growing output and orders for small to medium sized businesses.
These figures will stoke some optimism in the UK, at least that the economic recovery is bearing fruit beyond London and the financial services industry. However export orders remained flat in the three months to July, which was worse than expected. The CBI said that the disappointing export performance may be a consequence of the strong pound, which has forced about a dozen quoted exporters into profit warnings in recent weeks.
Although about 31 per cent of companies said they were more optimistic about their business situation, against 11 per cent who reported being less optimistic. However the CBI sounded a note of caution that shortages of skilled labour were impeding companies’ growth plans. The proportion of companies citing shortages as a factor hampering output rose sharply, from 14 per cent to 23 per cent, over the quarter, reaching similar levels to the second half of 2007 before the recession, despite the unemployment being nearly 15 percentage points than in 2007 at 6.6 per cent.
I remember learning back in the 80’s that the last budget you should cut during a recession is your training and development budget and it seems surreal 30 odd year’s later that business doesn’t learn from the past. It doesn’t take a rocket scientist to predict that once a recession is over ‘your’ organisation is going to need to recruit ‘new’ talent to support its growth – just the same as it did during the good times.
But it seems that after a recession many small businesses just simply aren’t ready to ‘adjust’ to the turnaround – albeit that theory and past practice tells you that the turnaround will come.
There seems to be this weird change that goes through the minds of many small business owners when times are tough – for some reason fooling themselves that ‘recession’ isn’t just a normal part of the cycle of business and local/global economies – and hence many don’t just become cautious they become totally risk averse.
For example, looking at the small business sector in the UK again – a study of the exporting habits of small and medium-sized companies found that some of the world’s fastest growing global markets were ‘severely underrepresented’. Where the study identified that British small businesses are more likely to export to New Zealand than China, prompting concerns that companies are missing opportunities.
Research from a survey of 1,000 small businesses by FedEx showed that small companies regard China, the world’s second biggest economy, as the most challenging country to trade with. Trevor Hoyle, vice-president of FedEx Express in the UK said “although UK SME’s are doing a good job, there seems to be a lack of awareness, and not only of the benefits to exporting, but to the resources available, which are plentiful if you know where to look.”
There is a huge difference when it comes to risk of being brave and being stupid – where having the courage to identify growth markets and going for them while others ‘ponder’ on the potential pitfalls can give you a significant competitive advantage as you develop contacts and relationships with your ‘new’ export market. China, for example, are going to buy from someone – so why wouldn’t you want it to be you?
Hurley, J. (2014). Small firms held back by failure to see the big picture. The Times. 4th August, p.47.
Leroux, M. (2014). Small businesses hire staff at fastest rate since 1988 but need export help. The Times. 4th August, p.48.

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