In a recent survey, SME owners were asked to list a challenge they expect to face in 2017. From the answers given there were some re-occurring challenges mentioned by owners in a variety of sectors, including retail, property, hospitality and automotive to name a few.
Here are some of the challenges SMEs owners are predicting they will face in 2017:
Competition is a challenge that SMEs face year on year and 2017 is no exception to this.
According to recent research, in 2015 one in five consumers were doing more of their shopping in independent shops than compared to the previous year, with 13% of British adults seeking independent retailers over the corporate companies.
Although the popularity of smaller businesses is increasing they still struggle to battle against large chains and the online market, with struggles only continuing to get worse as the popularity of online shopping grows.
A survey revealed that two thirds (64%) of UK SMEs face competition from new digital ‘players’ in their industry but only 6% of these SMEs facing such competition were investing in the new technology to compete and retain their share of the marketplace.
It seems that with the move to digital, SMEs in 2017 will have to adapt their business and take it online in order to stay in the game; otherwise they face an ambiguous future against rising competition.
Brexit and Trump
Unless you have been living under a rock for the past year you will know that Britain voted to leave the EU in June and also that Donald Trump won the USA presidential election. These two decisions have brought a lot of uncertainty, causing many businesses to list them as potential challenges for 2017.
Since the referendum results the Great British Pound has decreased significantly in value. Pre-Brexit £1 bought around $1.48 in global markets. It has now decreased by about 16%, making it now worth $1.24 on average. As a result of this drop, import prices have increased which affects those businesses that purchase goods, services and/or materials from overseas.
Although Donald Trump has little influence over British businesses there are not a lot of details coming out about his presidential plans and policies, some of which could affect international trading. Until more information about the effects of these two substantial decisions is realised, small businesses are remaining cautious.
Costs and Financial Difficulties
Costs are always a challenge for smaller businesses, particularly whilst competing with larger companies. As costs rise so must the prices of good and/or services which can cause customers to look elsewhere, hence the challenge.
A study by Make it Cheaper shows that 55% of small businesses in the UK fear for their survival as costs continue to escalate. The rising costs brought by Brexit, and business cost inflation rises, are making it difficult for businesses to continue trading.
The same study showed that 46% of UK SMEs have been forced to increase prices and 22% have been forced to cut staff.
The aforementioned rise in costs leading to a reduction in clientele has another negative effect on SMEs by putting them in a difficult position financially. These two challenges go hand in hand as a type of ‘cause and effect’ scenario.
The struggle financially is only made worse by the inability to access funding. A survey by the Federation of Small Businesses, of more than 2,000 of its members, found that 47% of those who had applied for a loan in the past three months had been turned down, which may be why financial difficulties was listed as a challenge across many different sectors.
It is the aim of most SMEs, and any size of business, to grow year on year; however expansion in 2017 has been noted as more of a challenge than a resolution for small businesses in 2017. This is predominantly due to an amalgamation of the above challenges, Brexit, Trump, costs and financial difficulties. These situations have brought instability, increased overheads and financial strain, meaning that some of the smaller businesses could struggle to continue trading let alone expanding and growing their business.
Those that do wish to expand, despite the other challenges could seek funding but, as mentioned in the previous section, this isn’t easy for UK SMEs. There are alternative finance options for small businesses and these include crowd-funding, peer-to-peer lending and an unsecured business cash advance.
- Crowd-funding involves a company presenting a product or idea to the public who then choose whether or not to back it with financial donations, usually in exchange for the product on release
- An unsecured business cash advance is a lump sum, similar to a small business loan, however there is no APR or fixed monthly repayments. The repayments are usually based on a percentage of your card takings. You can see how much you can borrow, over what time and how much your repayments will be by using a business loan calculator
- Peer-to-peer lending is a system of being matched with someone looking to invest in your company. All parties are usually credit checked and risk assessed prior to any lending taking place in order to protect both parties. This cuts out the bank as the middle-man giving both the lender and the borrower better rates and terms.
This alternative finance options may still allow small businesses to expand despite a tough 2016 and an unclear 2017.
About the author: Rob Straathof is currently the CEO of Liberis. Rob brings a wealth of experience from across the financial sector. This includes time at wonga.com in the corporate development team focused on acquisitions, and six years at J.P Morgan in the technology investment banking team. As well as Liberis, Rob has been a director at other SME focused lending businesses including Everline. He is also the founder of one of Rotterdam’s first online B2B lunch caterers.
At Liberis, Rob understands that technology can take the hassle out of finance, but that you should never underestimate the power of a voice on the end of a phone.
Originally from the Netherlands, Rob holds a Master of Science in Economics from Erasmus University.