Business costs continued to rise during 2013, with energy costs still the most commonly seen increase among small businesses, according to the national business group, the Forum of Private Business.
The Forum's Cost of Doing Business survey, carried out among its members, shows firms are still facing an uphill battle to make ends meet, despite positive signs of an economic recovery as the infographic below demonstrates.
The results showed that 94% of businesses saw an overall increase in their business costs. 87% of businesses reported an increase in energy costs, 83% in transport costs, 78% a rise in marketing costs, and 69% a rise in the cost of raw materials/stock.
Worryingly, the report also identified that 41% of small business owners admitted to being unable to pass any rising costs onto customers, forcing them to cut their own costs to keep prices static. Just 2% were able to pass on costs in full.
Alexander Jackman, the Forum's Head of Policy, said: "The major reasons for increases in prices were predominantly down to transport and energy prices rising, coupled with the continued weakness of sterling for importers. The economic outlook may be better but costs still remain an issue for our members and a key focus of our lobbying and support services.”
"Unfortunately, it doesn't look as if there is going to be any respite from energy hikes any time soon, despite the ongoing political pressure to take action to introduce more competition in the market, with many of the major players recently announcing significant increases and others expected to follow suit.”
While annual inflation continued to fall from 3% to 2.7%, the research also found that prices have continued to rise faster for micro, small and medium-sized employers at 6%, although this is less than the 6.7% figure reported by the Forum the previous year in research into business costs, suggesting things are improving – albeit slowly.
There was a significantly lower proportion of businesses concerned by credit restrictions last year, with a higher proportion seeing credit restrictions as having little impact on their operations. However, credit restrictions were still apparent, with 26% of businesses feeling they had less leeway in coping with business costs than they had the previous year.
81% of firms indicated that rising business costs had been detrimental to their business. 73% had cash flow issues as a result and it had a detrimental effect on 51% of firms when looking to invest. 51% also reported that it has been damaging for employment levels and 63% felt that it had inhibited their plans for growth.
Despite the recent positive news on the economy, rising business costs could continue to restrict the ability of many SME’s to take full advantage of the signs of recovery, with 83% of business owners quizzed expecting prices to continue to increase, and 16% expecting a significant increase.
The most frequently cited exacerbating factors were customers paying late (59%) and competitors offering products below cost price (51%). Excessive administrative demands forced on businesses by the government, banks and customers meant that 35% of businesses had not been able to focus on business activities. Changing payment terms had been a problem for 24% of businesses in dealing with suppliers, and 26% in dealing with customers.
“The findings suggest that significant action is still needed to tackle late payment, through strengthening the Prompt Payment Code to prohibit businesses from signing the Code if they have extended payment terms in the last 12 months. We would also like to see the government make it compulsory for PLCs to declare their annual payment time statistics in annual audits to support better payments.
“As well as positive action on late payment we’d like to see further steps to help small firms with business overheads. We’d like a freeze on business rates and small business multipliers in 2014. An extension of small business rates multipliers until the end of the current parliament would also be welcome and we’d like to see the government commit to undertaking independent research into business rates. While the Chancellor’s announcement of a fuel duty freeze at the Conservative Party Conference in 2013 was a welcome move, we feel that further action should be taken to investigate where further savings could be made across government to ensure that fuel duty is not raised again before the end of this parliament.”
For many businesses planning for growth, exporting can seem a highly attractive, but sometimes daunting, opportunity.
According to the Department of Business Innovation and Skills, approximately one in five of the UK’s 4.9m SMEs already exports and the Confederation of British Industry says you’re 11% more likely to survive if you export. So, it seems natural for many SMEs to start trading internationally, especially since many have suffered from stagnation or declining domestic sales in recent years.
But there is a degree of risk. Among the cultural, legal and bureaucratic barriers sits the challenge of financing new oversee sales and ensuring that your cashflow remains healthy.
Standard considerations when you’re an exporter include taking a localised approach, adapting your pricing strategies, perhaps establishing a local agent partnership and seeking support from a foreign trade advisory service, such as the UKTI.
But SMEs are faced with numerous challenges and difficult choices, and you may need to make some adjustments and allowances.
Recent data from the Economia Exports Survey suggests that SMEs that are new to international trade (as well as experienced exporters moving into new markets) cite a number of success factors, including having the necessary finance (34%), the ability to manage payment risk (26%) and solid management and leadership skills (28%). Concerns associated with exporting include the cost (36%), not getting paid (29%) and risk control (29%).
The international market is highly competitive and credit terms offered to prospective new customers can be the difference between winning or losing a deal – especially when it comes to larger clients. When you are at the mercy of their terms, foreign exchange fluctuations and cashflow management can be an issue. Not only might you have to manage extended credit terms, but high-value material costs may also need to be paid up front, while goods will now take longer to be shipped to the customer. The result is a cashflow void, and small businesses need to have cash management strategies in place to lessen the negative impact this might have on them.
Short-term finance is sometimes necessary to bridge the gap between supply of the product or service and payment receipt. Traditionally, financial securities such as International Documentary Collections and Documentary Credits have offered exporters peace of mind, however, it is estimated that as many as 80% of exporters have moved away from these somewhat burdensome trade finance products. Instead, they are conducting international trade on the more cost- and time-efficient open account basis.
For small businesses trading with an overseas customer for the first time, trade finance might not offer much help if less than favourable terms have already been agreed. Similarly, an open account may be a risky option early on in the relationship.
To overcome the financial challenges of operating in foreign markets, invoice trading has emerged as a new form of trade finance and it allows invoices in foreign currencies to be traded. This means that businesses can remove the ‘cashflow squeeze’ that can occur in contract delivery.
The result is a flexible and competitive way to raise short-term working capital without having to sign lengthy contracts. SMEs can obtain up to 90% of their international invoices upfront from investors who understand the commercial realities of international trade and bid between themselves to provide the lowest cost finance.
When essential cash is needed to finance paying upfront for materials and maintain a healthy operation until the end customer pays, invoice trading can provide a valuable lifeline.
Ultimately, the success of a business may be the result of taking a risk. In the context of international export, that risk may be the acceptance of a new, large customer. The right short-term finance and cashflow products in the form of selective international invoice sale and repurchasing can provide one of the building blocks for export success.
Blog supplied by Beth Nicholas on behalf of Platform Black, provider of complementary and alternative finance solutions including invoice trading, supply chain finance and channel finance.
Flexible working isn’t right for all businesses. Call centres, for example, can only function with a traditional workplace structure in place. For creative and consultancy-based disciplines, however, you can match and even exceed productivity by giving your staff greater flexibility. In our quest to be a better employer – and get the most out of our staff – we’ve learned a few lessons we wanted to share.
Teams that perform knowledge-based roles can work pretty much anywhere they can get reception and plug in a laptop. For that reason, we have a developer who works 300 miles away and barely steps foot inside our Stockport-based offices. Similarly, I’m only in the office two days a week, spending the remaining three beavering away from my home. All the work gets done, though, no matter where we are located.
However, we need our distribution staff to work in our warehouse to set hours, it’s the only way to meet delivery deadlines. Flexible working for this function is just not an option.
If you’re adopting a more flexible hours/location approach, you’ll need to revise your line management model, and the solution for this is to replace a hierarchical structure with a flat one.
This means instead of employees measuring their progress by their peers, they measure their own achievements against KPIs (key performance indicators) you’ve agreed with them.
There are three reasons for having a flat structure. Firstly, it’s purely practical. If your employees are working out of the office, they no longer have peers constantly within sight to use as benchmarks. Secondly, they become more concerned with their own development than their colleagues' – reducing time spent on office politics, increasing time spent on development. Thirdly, you are both very clear on what you expect from them.
Thanks to today’s technology, you and your team can be virtually in the same room, even though you’re physically miles apart. Meaning there are lots of ways combine the benefits of working from home with those of being in an office.
For example, I work at home for three out of five working days each week. But Google Hangout allows me to virtually work side by side with colleagues who also work at home. We turn the camera off (as we have no interest in being in our own reality show!), but keep the sound on so we can talk through issues in real time, update each other on projects and ensure we have a healthy amount of banter to keep us sane.
We’d also recommend ensuring you’re in constant communication with your team, even if you’re working remotely. Each morning our senior team ‘meets’ for a 20-minute call so we can discuss the previous day’s activity and agree plans for the day ahead. It ensures we’re all working in sync.
Finally, we’re huge fans of Google Suite. It’s a fantastic tool with a series of apps that allow you to collaborate on one project at the same time and save files to a cloud. Meaning there’s no need for a hard drive, jobs can be are completed much faster and gone are the days of 23 versions of the same document.
We all know that a project’s success is due to the productive hours put in – rather than the minutes clocked up with bums on seats. Just because someone appears to be at work does not always mean they are!
But we know from talking to some of our ‘old-skool’ contacts, it can be hard to trust that staff are working when they’re ‘working from home’. So we’re huge advocates of KPIs. They enable you to set targets and measure progress, leaving you to trust your employees to get on with their work. If they’re hitting the numbers, the work’s being done – and it doesn’t matter if they’re working from midday until 6am or from their second home in Spain.
Replacing a traditional workplace structure with something more fluid has delivered two key benefits to our business. Firstly, our time has increased. We no longer have to deal with the endless ‘can I leave early?’ questions, which zap time that can be better used.
Secondly – and most importantly – staff are happier, more relaxed and able to achieve a better work-life balance. By trusting them, they respond with greater productivity, resulting in a win-win for everyone.
Blog supplied by Sean Blanks, marketing director of Cartridge Save Ltd (“the UK’s largest reseller of ink and toner”).
1 “Being your own business cannot be improved by unnecessary physical ‘accoutrements’, so think carefully about any purchases you think you need to make because you’re now ‘a business’”
2 “In the UK, anyone can call themselves ‘an accountant’ – even if they aren’t qualified. So, ensure that the one you choose is suitably qualified and part of the relevant professional body”
3 “Spend 30 minutes each day thinking. It seemed to work for Bill Gates. He’s reported to have spent one month every year thinking up ideas for his business”
4 “Managers make sure that everything is controlled properly; leaders create the vision, the enthusiasm and the passion. The best leaders are those who inspire and create followers”
5 “It's funny how the best ideas can come to you by accident – literally, in my case”
6 “Let’s be honest, a boring, drab, dark office has never inspired anyone to do anything”
7 “Think about issues that people are faced with every day and write them down. Helping to solve such problems could enable you to come up with some excellent ideas”
8 “Look for a business mentor to help you stay on track and advise if things get tough”
9 “In 1919 a man called Jack Cohen decided to sell more than just syrup and fish paste. He started selling tea and laid the foundations for what we now know as Tesco”
10 “Nobody wants to think that what you thought was the perfect hire could result in a costly tribunal case, but one in six disputes do – at an average cost of £9,000”
11 “According to Experian, there are some 900,000 businesses in the UK that have real potential to start exporting and yet they are still only serving the UK market at the moment”
12 “Never sit back and admire what you’ve achieved – look forward to what’s next. Have the courage of your convictions and think about what you need to do to reach new markets”
13 “Up to £150 per head of the cost of holding a Christmas party is an allowable tax deduction and VAT can also be recovered on staff entertaining expenditure”
Thank you to our sponsors for their support last year. Many thanks also to the experts who shared their knowledge and provided content that ensures this blog remains a popular source of information, advice and inspiration. A big ‘Thank You’ also to our ever-growing list of partners – we look forward to working with you this coming year and beyond.
Finally, a massive ‘Thank You’ to all our readers in 2013. Whether you were thinking of starting your own business and were looking for inspiration or were starting your own business and needed advice, we hope you found what you were looking for.
Happy New Year and here's to a superb 2014…
What advice would I give to someone starting out in business who may be worried about funding? Today, I think people in need of funding and hoping to start a new business tend to approach the banks automatically, by default. Then, if they’re declined, the big question is – ‘What next?’
To those people, I would say that I think it’s never been a better, more exciting time to explore different avenues.
The difficulty with the banks and getting loans through conventional methods has meant other opportunities have had to appear through necessity. There are plenty of different models and lots of people actually looking to invest in new businesses – look at crowd funding, for example.
It can be worth considering friends and family, too, and approach them for investment, although you’ve got be careful that you’re very clear on the terms early on.
Which investment am I most proud of? I find it really difficult to pick a favourite investment. When I’m visiting a business or I have to be especially focused on one in particular it has 100% of my attention. It becomes all that I can think of, all that I can see and it becomes the one that I love the most. But when I walk out the door or shift my focus to another investment, that becomes the one I absolutely want to do.
I’ve got a portfolio of 19 businesses that I’m currently invested in. It’s been known to flux up to a maximum of 30 and down to ten.
There is one that I’m very pleased I got involved in and it was a cloth mill called Fox Brothers, which started in 1772. It was the last cloth mill left in the South West and it was dead – absolutely on its knees. I didn’t know that when I invested.
I’m pleased to say that now it’s doing well and I’m really proud to have been involved. I like to think that if I hadn’t found it, and it hadn’t found me, it would have died and a part of our heritage would’ve been lost.
This exclusive insight was taken from an interview conducted by cityindex.co.uk when Deborah recently participated in the city index celebrity trader challenge. Find out more about Deborah and her views by visiting her website.
It is often said that employees are the lifeblood of a business and it is certainly true that they are an important factor in its success. For this reason ensuring employees feel valued is vital in order that they remain motivated, loyal and productive.
Research conducted by Modern Survey suggests that 85% of employees who feel meaningfully recognised will go above their formal responsibilities to get a job done. However, as economic conditions continue to be tough, allocating a significant budget to an all-singing, all-dancing staff reward and recognition scheme is often simply not an option. Business owners and managers should therefore be looking at low-cost, high-impact alternatives.
Praise and recognition are essential and everyone likes a ‘pat on the back’ to make them feel good. Often the only reward for hard work is the satisfaction of the individual responsible in seeing a job well done, but it is important that time is taken to shine a spotlight on them.
Recognising an individual, or a team or department, has a huge knock-on effect throughout a business with word spreading both through the grapevine and via more formal communication channels. This mustn’t just apply to those team members whose contributions are obvious, such as those in sales. Equal pride must be taken in those whose skill and dedication is an integral part of your business success.
Can this be achieved on a budget? Yes, because a crucial element in any employee recognition programme is presentation and, for this reason, the reward itself does not need to be high-value. In most cases, acknowledgement in front of peers is known to mean more to the recipient than the reward itself and so the reward can be relatively low-cost, or in some cases no-cost. Rewards that cost little but have a big impact include an extra day’s holiday, employee of the month parking space or a free car clean during working hours. Thanking employees with an early finish on a Friday afternoon, a late start on a Monday morning or an extended lunch break are also popular as are experience days, giftcards and vouchers.
The key is to dedicate some time to present the reward in public and say a personal thank you, because it enhances the overall sentiment of the gift and makes it even more memorable. Overall, if employers recognise publicly, often, and associate the reward with desired behaviours, better results will be achieved than if the budget was blown on a fancy reward.
Length of service awards are another effective way to recognise employee contribution without incurring significant cost. They may seem like a thing from the past, but switched-on businesses are maximising their effectiveness by rewarding frequently to deliver recognition to the employee that will inspire a fresh burst of productivity and re-engage them in the business.
Today, the gold watch for 25 years of service is no longer relevant and so businesses have significantly shortened the length of time before awards are given with awards after five, 10 and 15 years. In some high employee turnover industries, such as call centres, rewards are given after six months or a year. While the physical award can be low-cost, such as a meal out, it is important to make the process of rewarding a really big deal by ensuring the presentation is attended by peers and by shouting about it via the appropriate communication channels.
Another low-cost step that employers can take to boost employee morale, engagement and loyalty is recognising and celebrating a range of occasions with them, including birthdays, weddings, housewarmings, baby showers, length of service awards, Christmas and special anniversaries. Arranging for a card containing a small gift to be delivered to an employee’s desk, home or email inbox is a personal and special way to recognise employees who creates a feel-good factor in the workplace with minimal financial outlay and effort for the person tasked with organising it.
Businesses that take small steps such as these to recognise and reward employees and make them feel valued will reap the rewards.
Blog supplied by Kuljit Kaur of The Voucher Shop.