- 75% of SME owners say the rules of doing business have changed – in areas such as competitor activity, decision making and keeping up with regulatory challenges
- 88% think their biggest challenge in the year ahead is unpredictable market demand
- More than half of SME owners are happy with their work-life balance. However, 37% find it difficult to switch off and one in five (20%) described their work life balance as ‘out of control’.
- 64% of SME owners say they lack support and feel they are running their business alone, on average, twice a week. One in ten reported lacking support at least once a day.
The rules of doing business have changed, but are SME owners ready for the challenges that lie ahead? Research by accountancy firm, Menzies LLP, reveals that SME owners are focused on what they need to do but there are signs that some could be working too hard or failing to seek the mentoring and specialist support needed to succeed in turbulent times.
Based on a survey of 1,003 SME owners in the UK, three quarters (75%) of respondents said the rules of doing business have changed significantly in the past year and Brexit and other uncertainties mean they were likely to keep changing.
The higher the business turnover, the more likely respondents were to agree that the rules of doing business had changed – 91% of businesses with a turnover between £1-10m and 93% of those with a turnover between £10-50m shared this view.
Of the SMEs that believe the rules of doing business have changed, the main observation is that competitor activity has become more intense and there is a constant need to ‘stay one step ahead’ (43%). Other key observations include a belief that important business decisions have become more data driven (39%) and a need to keep track of regulatory changes (38%). Smaller businesses, with fewer than 50 employees believe the most significant changes over the past year are increased competitor activity and a shifting regulatory outlook, whereas larger businesses, with more than 50 employees, believe that business decisions are more data driven and there is less time to weigh up the pros and cons. Start-up businesses are also aware that business decisions have become more data driven over the past year.
Julie Adams, senior partner at accountancy firm, Menzies LLP, said:
“Small and medium-sized businesses have a much closer understanding than multinationals of how the rules of doing business have changed. This awareness combined with their size and agility has enabled many of them to adjust to the uncertain market conditions. The research shows that larger SMEs that employ more than 50 staff are acutely aware of the need to react to changes in market demand and make business decisions more quickly. For many, the ability to lay their hands on reliable and up-to-date data in a format that is tailored to the operational needs of the business is now critical.”
With more changes on the agenda, the majority of SME owners (88%) know they could be facing diverse risks in the year ahead and the biggest challenge will be predicting future market demand. The top five risk factors identified by SME owners were cash flow difficulties; geopolitical uncertainty; breaks in supply; a lack of resources (management time and skilled people) and difficulties accessing finance. The owners of start-up businesses (those that have been trading for less than two years) believe ‘cash flow difficulties’ are twice as likely as any other risk factor to impact their trading performance in the year ahead. Only 9% of start-up businesses believe there is no obvious risk to their business model in the year ahead.
Proving that they are ready for the choppy waters that lie ahead, SME owners appear to be very focused on the things that are important to the success of their business, possibly to the detriment of their personal lives. The majority of SME owners said their top priority is ‘delivering a good quality product or service’. There were some age-related differences – SME owners aged under 40 stated that managing costs efficiently and delivering a quality product or service were their top priorities, whereas the over 40s put delivering a quality product or service and personal enjoyment top of the list. Regardless of age, SME owners agreed that spending quality time with family and friends is not as important as running a successful business.
The majority of SME owners (53%) claim to be happy with their work life balance., However, on closer questioning, the picture is more ambiguous. A third (37%) of SME owners admitted finding it difficult to switch off and enjoy their downtime and one in five (20%) described their work life balance as ‘out of control’. Worryingly, a quarter of the latter didn’t think this was a problem.
Julie Adams, senior partner at accountancy firm, Menzies LLP, said:
“SME owners seem broadly happy with their work life balance but the findings show that their priorities are skewed towards their professional lives and some are struggling to find time to relax away from the business. Whilst staying focused is important, the most successful entrepreneurs tend to be those with a more rounded approach to life who understand what they are doing it for and plan their futures on this basis. In uncertain times, SME owners need to do more, not less, of this type of forward thinking and keep their plans under review.”
There are other indications that SME owners may be feeling stretched and lack the support they need to realise their business potential. The majority of SME owners (64%) report that they lack access to support and feel they are running their business alone, on average, more than twice a week. More than one in 10 (11%) SME owners reported feeling a lack of support at least once a day. Early stage businesses (2-10 years), but not start-ups, are most likely to report feeling alone when running their business and those that have been trading for longer than a decade are least likely to feel they lack support.
“The research shows that there is a gap when it comes to the support available to UK SMEs. Whereas start ups and more mature businesses are finding the support they need, some early stage businesses could be falling in the gap. Better signposting to mentoring and other business support services may be required,” added Julie Adams.
To view how SMEs are re-writing the rules, visit here.
An unprecedented Black Friday: How can retailers prepare?
Retailers must invest heavily in their online presence and fight hard to remain competitive as a second lockdown stirs greater uncertainty
With an unprecedented Black Friday and Cyber Monday weekend on the horizon (27th – 30th November), eCommerce hosting and consultancy expert, Sonassi, advises retailers to strengthen their online presence and make the necessary preparations for a fatigue in consumer spending.
James Allen-Lewis, Development Director at Sonassi, explains: “This year’s golden quarter has squeezed together three of the biggest sales periods like never before, meaning retailers will have to fight harder than usual to remain competitive this Black Friday. With greater discounts over a longer period of time, alongside the fact that a second lockdown has moved everyone and everything online, retailers will be battling it out for a share of decreasing consumer spending.
“However, this sense of uncertainty should not deter merchants from implementing their sales strategies this Black Friday and Cyber Monday weekend. Instead, they must go further than simply providing online discounts and tackle challenges head on by re-focusing their efforts on creating a highly competitive user experience. Successful merchants will make the necessary preparations for a change in consumer demand and invest more heavily in their eCommerce infrastructure.
“One way in which retailers can do this is by using last year’s Black Friday as a case study to inspire their future response. For example, retailers should take note of the key consumer behaviours that transpired throughout last year’s mega peak in discounting and plan accordingly for the upcoming Black Friday and Cyber-Monday weekend.
“Tactics such as providing the ultimate online delivery service and secure payment methods will also be pivotal for retailers looking to survive a fatigue in online spending. Consumers will look to retailers who do not overpromise on items like next-day delivery and ensure their checkout process is safe and frictionless for all. It is the retailers who embrace this fact and meet the needs of the conscious consumer that will win their share of consumers wallets.
Allen-Lewis concludes: “With Black Friday and the build-up to Christmas just around the corner, retailers must adapt to changing consumer demand, invest more heavily in their eCommerce infrastructure and focus their efforts on creating the ultimate online experience. The only way to plan ahead amid challenging times is to listen to the needs of the customer.”
Optimistic outlook for 2021 public M&A
Optimism is returning and the outlook is positive for the Australian M&A market in 2021 after a COVID-induced crash in deal activity in 2020, according to Corrs Chambers Westgarth’s tenth M&A 2021 Outlook report.
The special report reveals that an environment of historically low interest rates positions M&A as a significant means of achieving growth and generating returns, including for private equity firms looking to deploy capital and strategic buyers focused on complementary acquisitions.
With the unprecedented challenge of the COVID-19 pandemic, global political instability and arguably the greatest economic challenge since the Great Depression, M&A 2021 Outlook details somewhat surprising trends emerging for the next 12 months and analyses a number of common COVID-19 myths and their influence on future M&A deal making.
Corrs’ detailed examination of the Australian M&A market draws on data taken from the firm’s proprietary database of transactions combined with in-depth research for the 12-month period ending 30 September 2020.
Key trends identified in the report include a rapid escalation in M&A levels and an increase in creativity in pricing and speed in closing deals, while also highlighting the critical need for support from target shareholders. Conditions also appear to be set for a continued rise in equity prices as a result of the ongoing influx of capital into Australian equity markets, making it imperative that bidders employ strategies to move quickly on M&A transactions.
Discussing the M&A 2021 Outlook, Corrs Head of Corporate, Sandy Mak, said “Despite a challenging year, our research indicates that 2021 could well see the volume and value of deals continue to grow. We are already witnessing this uptick in activity and while some industries and sectors are seeing a faster rebound than others, early indications are that the wider public M&A market will continue to strengthen over the coming months.”
Based on its detailed research, the M&A 2021 Outlook report discusses further key findings including:
- Deal volume and value is the lowest since 2016, however volumes have shown significant recovery since June 2020.
- More than 50% of deals in 2020 were ‘hostile’ and not recommended at the outset.
- 71% of deals over A$500 million were structured by way of a takeover – a significant increase from prior years – largely as a result of increased competition for assets through rival bids.
- Despite border closures and the tightening of foreign investment regimes, the percentage of deals with foreign bidders has increased materially since April 2020.
5 steps for SMEs to budget properly for the coming year
By Fabio Comminot, Head of Dealing, Switzerland at Ebury, one of Europe’s largest Fintechs, has provided a five-step guide to make sure budgeting is done on time.
During the challenging times of COVID-19, it is difficult to forecast orders and costs. This is especially true for SMEs that operate internationally and therefore are exposed to currency fluctuations and market movements. So budgeting is immensely important.
Autumn is budget season for most companies. Upcoming project costs, sales and fixed costs must be defined or forecasted. Budget planning should be as accurate as possible right from the start of the process to avoid unexpected consequences at the end of the year..
With the effects of the COVID pandemic it has become difficult for all companies, no matter their size or history, to plan and make sales forecasts. Early planning and hedging are especially important for companies that work internationally and are therefore particularly exposed to currency risk.
These five steps will help SMEs take the right measures for the coming financial year, in time for budget season:
Step 1: Estimate your costs or sales in foreign currencies
As difficult as it may seem, every company must estimate its expected fixed and variable costs for the coming year. Most companies can forecast their revenues based on experience or existing orders.
However, start-ups or young companies should also be able to at least estimate their costs including rents, insurance, wages and production costs. Special attention should be paid to costs or revenues that are spent or received in a foreign currency.
Step 2: Profit or cost assurance – define the strategy
As soon as an approximate plan for the coming year is in place, the company should consider the importance of currency management. Regular earnings or expenditures in foreign currencies are exposed to movements in exchange rates. If costs in a foreign currency are to be forecasted until the end of the year, the company needs to minimise volatility. This means that the exchange rate should be fixed so that there are no unexpected negative consequences at the end of the year.
Another option would be to protect the operating profit. Fluctuating exchange rates can rapidly ruin intended profit margins. In this case the company could aim to define the forecasted sales in the foreign currency and fix the margin based on this.
Step 3: Fix your budget rates
The budget is set, the currency management goals are defined, the major part is done. Now it is a matter of defining the budgeted rates for the various currencies based on the current exchange rate. A buffer of about 5% can be useful when doing this – for example. instead of fixing the exchange rate from US dollar to Swiss franc at the current 91 cent, a rate of 95 cent could be budgeted. In this way, the minimum budget rate is defined and any negative exchange rate movement can be at least partially compensated for.
Step 4: Define the hedging strategy
With the targets and the budget course set, the next questions are: What currency developments can be expected? What is the industry outlook? Is the order situation relatively secure? Or is there practically no empirical data?
This step is where Ebury can support the company. Our experts in FX markets help answer these questions and begin to define the individual hedging strategy.
Step 5: Ensure a flexible fit
It’s done: the measures have been defined, now it’s time for implementation.
Ebury will implement the previous steps and , so that the company focuses on its core business. In contrast to traditional financial services providers such as banks, Ebury constantly monitors international trade and political events in order to assist clients with strategy adjustments. The Ebury team is supported by state-of-the-art technology and international currency analysts. It makes no difference whether the changes are driven by the currency market or whether the company’s order situation itself is changing. This allows the SME to focus on its operational business, which is worth a lot in uncertain times like these.
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