Small to medium-sized businesses, also known as SMEs, are an integral part of the UK economy. As you can imagine, these businesses can range from small industrial units to self-employed traders.
However, despite the large amount of SMEs, with more being created daily, life can be tough. These businesses face the same challenges that their larger counterparts do. However, a larger business can often overcome different challenges, thanks to its operating size and scale. Smaller businesses have to be more adept at navigating the challenges that may present themselves.
A smaller business will also have to contend with changes in the economy, competition, and the altering preferences of customers.
We have outlined below some of the challenges that small businesses may face in 2020. This can include challenges that all businesses will have to contend with, such as Brexit, but will also include those that are specific to SMEs.
How many small businesses survive?
Small businesses are continuing to grow. Between 2018 and 2019, an incredible 672,890 new businesses were registered in the UK. That's an astonishing 70 businesses every hour. At the end of the first year, it was estimated that just over 90% of them would still be operational. However, within five years, only 40% are expected to be operating.
Businesses can fail for several reasons: competition, constant innovation, and economic issues are just the tip of the iceberg. Sometimes, it isn't possible to shield businesses from all the challenges they may face.
Having said that, many businesses simply fail to succeed because they don’t identify challenges and problems early on. With the right measures in place, businesses have a much greater chance of survival.
Of course, it goes without saying that Brexit is one of the chief concerns for small businesses. There is no doubt that Brexit will pose a challenge for employers in 2020.
The recent general election has provided some clarity on the Brexit path ahead, and mitigated some of the uncertainty for businesses. Despite this, however, a recent YouGov survey revealed that 39% of SME owners feel that leaving the EU will still make their business worse off.
2. Cash flow
Cash flow has been a constant challenge for small businesses, and this trend is unlikely to change in 2020.
A recent report from Guidant Financial found that just over 30% of business owners surveyed said that cash flow was a challenge. However, 78% of those surveyed had businesses that were currently turning a profit.
It doesn't matter how much profit your business makes – if there is no cash, there can be no business. Cash flow can cover things like payroll, rent, business tax, invoices, equipment, and supplies, and maintain the day-to-day operations of your business.
Falling sales and high spending levels are some of the main causes of cash flow problems. However, the most common factor is clients and customers paying late.
3. Talent shortage
Though in London there is an overabundance of talent, in other areas of the UK it can be a constant challenge to fill vacancies. These shortages can have a serious effect on businesses.
Recruitment challenges prevent small businesses from growing, and leaves many of them with no choice but to use temporary contractors (costing significantly more).
Cyberattacks are a frequent issue, and, as we move into a new decade, they will continue to provide challenges for SMEs. This is because small businesses are better targets. The reasons why they are more likely to experience a cyberattack are:
- they don't have adequate security measures in place
- they hold onto sensitive data that could be accessed by a hacker
- they tend not to use off-site or cloud-based storage for data and records
Preparation is vital
Though businesses can't fully predict what will happen in 2020, it is still absolutely vital that they look ahead as much as they can. If a business knows what is coming, then they can better prepare for any challenges that may arise. A small business with the right preparation has a greater chance of tackling the challenges that 2020 presents head-on.