UK SMEs look forward to increased revenues & profits, with plans to focus on expansion and sales growth to drive financial performance
Small and Medium sized businesses[i] (SMEs) in the United Kingdom and globally are confident about their future business performance, optimistic about the economy and believe they have the strategies in place to thrive in an age of uncertainty, according to the American Express® Global SME Pulse[ii].
The research, carried out among senior executives and decision-makers in SMEs across 15 countries, reveals that SMEs are confident in their ability to deliver increased revenues and profitability. Globally, across regions as diverse as the Americas, Asia and Europe, 58 percent of SMEs surveyed expect significant revenue growth over the next 12 months. Reflecting the global optimism, 50 percent of UK[iii] SMEs surveyed anticipate revenue growth of at least 4 percent over the next 12 months. Furthermore, 16 percent of these look forward to revenue growth of at least 8 percent over the same period.
In terms of profitability, the UK’s SMEs are similarly upbeat with 57 percent forecasting a net profit of 4 percent per annum over the next three years. 22 percent forecast net profit in excess of 8 percent over the same period.
More broadly, SMEs across the globe are optimistic about the health of the world economy over the next 12 months, with SME decision-makers more than twice as likely to be positive than negative about the economic climate (39 percent positive versus 16 percent negative). The UK is similarly upbeat, with decision makers likely to be positive about the global economy. Looking domestically, this optimism is replicated at a local level with SME leaders in the UK almost twice as likely to be positive than negative about the state of the UK economy over the same period.
Economic and political uncertainty seen as key challenges
While SMEs are optimistic about the economy and their own business, they also identify areas for concern. Economic uncertainty in their home market is seen as the largest threat to the business both globally and in the UK. Domestic political uncertainty is a further concern for 28 percent of UK SMEs. Meanwhile over one-third (35 percent) of SMEs based in the UK identify uncertainty in their European export markets as a leading threat to the business’s performance. Interestingly the survey, which was conducted after the Brexit vote, found UK SMEs are more concerned about this threat than their peers in other European markets where the proportion of SMEs seeing this as a concern ranges from 24 percent (Spain) to 32 percent (France).
Focus on expansion and sales growth to drive financial performance
Despite uncertainty, SMEs globally and in the UK are focusing on growth and expansion strategies to improve their financial performance. Forty-three percent of UK SMEs say expansion into new domestic markets will be a top priority for their business over the next three years, while 33 percent make growing their share of current markets a key focus.
Alongside these growth-focused strategies, UK SMEs will look to increase operational efficiencies to help achieve their financial objectives: over one-third (35 percent) say this will be a key driver of their financial performance over the next three years.
Increasing exports part of the growth push
Exporting is a core pillar of many SMEs’ growth strategies globally and the UK is no exception: almost one third (32 percent) of UK SMEs identify expansion into new international markets as a pathway to improved financial performance over the next three years. Many UK SMEs are confident they are ready for export growth, with 47 percent strongly believing their company has the right plans in place to increase export sales. Furthermore, half of the SMEs surveyed in the UK agree it is easier to access new export markets than it was three years ago.
Confidence among UK SMEs about exporting is reflected in their turnover projections: the number of UK SMEs generating 50 percent of more of their revenues from exports will more than double, from 21 percent today to 44 percent over the next three years.
Seek more diverse sources of finance to fund growth
Many UK SMEs struggle to finance the investment required for growth. Well over half (57 percent) say they face difficulty accessing the finance they need to grow their business while a sizeable 60 percent say that inadequate cash flow affects their ability to pay suppliers on time.
UK SMEs today rely on existing working capital (54 percent), bank loans (48 percent) and private equity (37 percent) to fund their investment. Over the next year, SMEs plan to continue to take advantage of a diverse set of funding options. Their existing top options will remain important, but many SMEs will also be looking to non-bank sources of finance such as crowdsourcing and cards to gain access to capital to grow.
Look beyond the short term
As part of the research, top managers in UK SMEs were asked about the long-term goals of the business. While profit margin growth (54 percent) and revenue growth (47 percent) are identified as the number one and two objectives respectively, well over a quarter (28 percent) of UK SMEs state that sustaining the business for future generations is an important long-term goal. SMEs in the UK are more likely to take this long-term view than SMEs in the rest of the world (23 percent of respondents outside Europe ranked sustaining the business for future generations as a top objective) which demonstrates the important contribution these businesses make to the UK’s economy.
Commenting on the findings of the research, Jose Carvalho, Senior Vice President, Global Commercial Payments Europe at American Express, said: “It’s very encouraging to see this evidence of optimism and self-confidence among UK Small and Medium-sized enterprises. Businesses are deftly navigating through challenges and this resilience is helping them to thrive.”
Continuing, Jose Carvalho said: “The research shows SMEs are focusing on expansion and growth opportunities, reaching out to new markets and customers at home and globally. However, it’s clear these enterprising businesses often find it difficult to access the finance they need to invest, and as a result they’re looking beyond traditional sources to secure funds to enable them to thrive and grow in the long term.”
Spotlight on UK SMEs – additional insights
Priority areas for investment by UK SMEs for the next 3 years:
- Quickly responding to changing business demands (79 percent)
- Applying the latest technology (63 percent)
- Developing and implementing innovations to business models, products and services and ways of working (60 percent)
Getting closer to customers is a priority for UK SMEs:
- 62 percent agree their customers are demanding more new or tailored products and services
- Over half (51 percent) say understanding changing customer demands is a key strategy for revenue growth
- UK SMEs see customer insight as the key to successful innovation: most (over 64 percent) say incorporating customer feedback into the R&D process allows them to improve their innovation
Research exposes the £68.8 billion opportunity for UK retailers
- Modelling shows increasing the proportion of online sales by 5 percentage points would have significantly boosted retailers’ revenues during the first lockdown
- 72% of Brits want retailers who started an online service during the pandemic to continue operating it full time
New data released today by global payments platform Adyen, outlines the economic gains that could be accessed by getting more UK retailers online.
Economic modelling conducted by Cebr for Adyen indicates that if the retail sector increased the proportion of turnover stemming from online channels by 5 percentage points, £68.8 billion would have been added to the economy during the first lockdown.
While retail turnover stemming from online sales has grown significantly during 2020 – from 19% to 28%, there is still considerable room for growth.
Myles Dawson, UK Managing Director of Adyen comments: “The UK retail sector is facing an incredibly tough quarter, so creating the link between physical stores and online channels is more important than ever. With the festive period approaching and many shoppers unable, or uncomfortable leaving their homes, establishing and maintaining a positive online experience is a billion-pound opportunity for retailers.”
The research of 2,000 UK consumers found that 31% are less likely to shop in physical stores now because of positive experiences shopping online during the pandemic. Furthermore, 72% of these consumers want retailers who started an online service during the pandemic to continue operating it in the long term.
However, making the process of shopping online as frictionless as possible will be key to unlocking the opportunity presented by online channels. 70% of Brits say that when shopping online, the ease of use is as important as the quality of the product, and 72% won’t shop with a retailer whose website or app is difficult to navigate.
Myles Dawson concludes: “Many retailers did amazing things during the pandemic in terms of adapting and creating new experiences – it’s a testimony to their agility that 57% of Brits said their expectations of the retail sector has improved during the pandemic. The challenge now is to consistently meet these expectations going forward. With local lockdowns in place, online channels will be key to serving many consumers in the short term. However, retailers need to see the shift to unified commerce as a long-term trend. The sooner they can demonstrate agility and jump on board, the longer they’ll reap the rewards.”
2 Research conducted by Opinium Research LLP
Want to serve your customers better? An effective online strategy is what financial institutions need
By Anna Willems, Marketing Director, Mention
A strong online presence matters.
Having a strong online presence, that involves social media is now a crucial part of all business strategies. Whether they are retail brands, sports teams, libraries or even restaurants, most companies are investing more and more in developing their digital brand image and online presence – financial institutions are no exception.
When it comes to market trends and innovation, financial institutions are first on the line. After all, we — people and companies — trust them to manage our money to the best of their abilities. And even more so than any other market, we demand secure, trustworthy, fast and user-friendly services.
Reaching such high expectations is not a given. To this point, banks and other financial institutions have no other choice but to have a perfect understanding of their market, their audience, and their needs. What they need to get there is a fail-proof online strategy.
Gaining a deep understanding of your market
One of the best things about using social media to learn about your audience is that people give unsolicited opinions. They speak their mind and share their thoughts candidly.
This is the key to help any business to learn about themselves. They get to analyze their audience’s challenges and aspirations without having to ask them directly or serve them time-consuming surveys and polls.
UK-based Asto, a company that is part of the Santander Group, is committed to helping small businesses have access to financial and non-financial tools. Asto was looking for something that could help them discover what their target audience was talking about and find opportunities to add to the conversation. Mention enabled Asto to keep on top of reviews and customer comments, which has helped us provide a better service for our customers.
Which platform suits your offering the best?
There’s no point choosing to create campaigns on TikTok if your customers don’t use it – you need to think about who they are and work back from there.
You do this by automating the process using a social listening tool. A social listening tool will help you to view your market as a whole and identify where the key conversations are happening — and, therefore, where you should be. What’s more, you will never miss any relevant mention of your institutions, products, services, or competitors.
Handling a crisis
Financial institutions need to watch carefully for negative press – social media is the first place people will go to if they feel they’re not getting the service they need. In theory, rogue employees or unhappy clients can post anything they like online to try and hurt your brand. And if their messages gain traction, you’ve gone from one person saying bad things, to thousands.
That’s why listening needs to be part of any crisis management plan. Now, sometimes, there are crises you cannot prevent. And those usually hit pretty hard.
Power of influencers
For an influencer marketing campaign to work for your financial institution, partnering with nano content creators may well be the best way to go. They’re ability to play a part in how they shape your brand story can make a huge difference when it comes to engagement and reason to believe in your service.
Many financial institutions are already leveraging influencer marketing. It’s an efficient strategy to: Build trust and gain credibility, reach out to new audiences and share engaging stories.
The online review conundrum
94% of consumers check online reviews before they decide to buy something or subscribe to a service. They need what we call social proof. It says that the more people say they use your service, the more it will look like a good service. In short, you need to show how happy people are using your service. But not all online reviews are positive.
Having said that, we find that financial institutions shouldn’t ignore negative reviews. Instead, embrace them as an opportunity to rebuild trust in your brand. Less delicately put, take the bull by the horns and turn them to your advantage. Always respond to relevant complaints (and as fast as possible). Take responsibility for what happened. Be helpful.
And ignore trolls.
Learn from the competition
Over the last two decades, a marketer’s daily life has greatly evolved. Most importantly, we now can measure everything we do, including the consequences of our actions on our business. Having said that, you can’t evaluate how well you’re doing without comparing against
Truth is that 77% of businesses rely on listening to keep an eye on their competitors. What this means is that 4 in 5 of your direct competitors are likely watching each and every single step you take. And you should do the same.
Setting the trend
From staying up to date with the latest industry trends and innovations, to keeping an eye on the competitors’ newest services, to being the first to know of potential brand crises – tracking relevant online conversations lets marketing and communication professionals working for financial institutions to stay one step ahead in an industry that is leading change and innovation.
Why the Boom is Long Overdue (and Here to Stay)
By Roger James Hamilton, CEO, Genius Group
Virtually every aspect of our lives has been taken over by tech, so why is it that our schools, that are educating the business leaders of tomorrow, are still operating in much the same format as they did 100 years ago?
The global pandemic put digital learning in the spotlight and an Edtech boom has ensued, with companies like Coursera, Quizlet and Udemy seeing unicorn style growth. And the market is not slowing down. The education technology (Edtech) boom will continue.
Resilience and Growth
Unicorns are defined by rapid growth. Traditionally, these companies are not overly concerned with early profitability, long-term sustainability or value creation as much as with putting their competitors out of business.
But something different is going on in the Edtech market. The unicorn has lost its appeal. When learning platform Quizlet achieved unicorn status this year, CEO Matthew Glotzbach was keen to play down the moniker reserved for start-ups valued at $1 billion or more, preferring to liken his company to a camel.
Unlike unicorns, camels are real, hardworking beasts. Respected for their adaptability to various climates, resilience, and abilities to survive for long periods without sustenance. These are all traits much better suited to weather the economic storms created by the pandemic.
Despite their considerable abilities to adapt to challenging conditions, the climate is looking particularly sunny for camels within the Edtech market. In fact, all creatures great and small have the potential to capitalise on unprecedented growth in this sector.
The nature of education makes it a traditionally slow-moving area, which renders it unattractive to some investors. Yet, the coronavirus outbreak and subsequent surge in remote learning this year triggered a flurry of uptake in e-learning platforms.
We’ve seen the adoption rate for new technologies be accelerated by events like this before. For example, the SARS crisis of 2003 contributed to the boom in China’s ecommerce industry, as quarantines lead consumers to shop online. Of course, this market trend did not slow down once quarantine restrictions were lifted. Ever since, global online sales have risen exponentially. The same is set to happen in the Edtech market.
Providing a Solution
As with ecommerce in 2003, the demand for Edtech in 2020 was already there. It has been there for years. For the past decade at least, there has been a notable need in recruitment for qualified talent in data science, coding and digital. Edtech can bridge the skills gap, not only within formal education but also for adult learners upskilling and reskilling for today’s digital world.
Similarly, the financial crash of 2008 had the effect of fast-tracking the rise of the gig economy, requiring millions more to learn entrepreneurial skills. The idea of a job for life is now a distant memory. The Edtech sector can deliver the tools to equip students of all ages with the skills necessary for creating their own opportunities, as well as exchanging knowledge and collaborating in a digital economy.
Rising unemployment, as well as competition for jobs and government furlough schemes has seen interest in digital learning courses for adults also soar during the past few months. Figures show that the corporate e-learning market is set to increase by as much as $3.09 billion between 2020 and 2024.
The Edtech boom kickstarted by the pandemic is just the beginning in a paradigm shift in how we view education and work.
Over the next 10 years, with the rise of artificial intelligence, automated technology, and augmented reality, traditional, manual and customer service based roles will diminish and there will be less need for a large workforce when computers and machines can do the role equally well.
The need for a truly 21st century education system that reflects the needs of the job market is long overdue. Edtech companies are offering solutions to many of these issues that have troubled the economy for the past decade or more.
A Different Animal
Enter the zebra (back to our animal analogies). These types of Edtech businesses will be the ones to watch within the sector. With zebra companies, there’s a sense of community and collaboration, rather than competition. They understand that there’s room for more than one superstar in a market. Zebras are herd animals after all. The zebra believes that competition is healthy for everyone involved—something to watch and use for motivation and growth. It closely observes consumer trends and continually strives to solve new and developing problems for those consumers.
For zebra companies, profit margin is vital because it is necessary for steady growth and sustainability. Revenues hover between $5M and $50M, it serves customers within a specific niche, requires annual growth capital of $100K to $1M, and generally has more than four streams of revenue.
Zebras are both black with white stripes and white with black stripes – they have a fluidity in their approach and are camouflaged at the same time. This creates a double bottom line: Zebras want to conduct real business, by solving a pressing problem in a sustainable way, whilst reacting to contemporary challenges. This too could be said of the Edtech industry as a whole.
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