Small businesses taking protective measures to strengthen their businesses this quarter
Tuesday 4th April 2023
- Plans to hire more staff, expand into new markets, and invest in equipment all fall significantly in the last year
- Meanwhile, defensive measures such as improving cashflow, streamlining supply chain, and minimising fixed costs all increase
With the threat of a recession this year significantly reduced, new research from Novuna Business Finance suggests a mixed picture of optimism and caution amongst small business owners’ plans for the next three months.
A Novuna poll of over 1,000 small business owners and senior decision makers showed that two thirds (65%) of business owners said they were working on specific plans to try and achieve business growth in the next three months.
Defensive measures topped the list - keeping fixed costs down (57%), improving cash flow (32%) and being stricter with being paid on time (25%).
Tracking responses from previous quarters, the results showed that the proportion of businesses adopting defensive measures to strengthen their businesses had steadily increased over the course of the last year. The proportion addressing cash flow issues rose by 5%, while those ensuring fees were being paid on time rose by 4%.
| Q1'22 | Q3'22 | Q1'23 | YOY difference |
Improving cash flow | 28% | 30% | 32% | 5% |
Being stricter with getting paid on time (e.g. from clients) | 21% | 25% | 25% | 4% |
Keeping fixed costs down | 55% | 55% | 57% | 2% |
Streamlining supply chain | 9% | 9% | 9% | 1% |
Reassessing finance commitments | 13% | 13% | 14% | 1% |
Reduction in proactive steps to secure growth as small businesses act with caution
A key outtake from the research is the decrease in the number of proactive steps being taken by the small business community in order to strengthen their businesses and secure growth. Hiring new staff was down by 8% (from 28% Q1’22 to 20% Q1’23), expanding into new, overseas markets fell from 24% to 18% and investing in new equipment decreased from a fifth (21%) to 17% this quarter.
Q1'22 | Q3'22 | Q1'23 | YOY difference | |
Hiring more people | 28% | 22% | 20% | -8% |
Expanding into new markets/ overseas | 24% | 19% | 18% | -5% |
Investing in new equipment | 21% | 18% | 17% | -4% |
This rise in the proportion of small businesses relying on protective methods to secure growth could suggest a growing air of caution in the small business community. This is unlikely to be helped by the knowledge that the Government is bringing an end to the Energy Bill Relief scheme in April, with the Federation for Small Businesses predicting that around 370,000 small businesses will have to shrink or restructure as a result of the news.[1]
By sector, the story was a varied one. Those small businesses in manufacturing were most likely to be putting plans in place to protect their business (81% vs 65% national average), whereas finance and accounting was least likely (58%).
Small firms in the retail sector were most likely to be focusing on keeping fixed costs down (70% vs 57% NA), however this represented a decrease on this time last year. In place of this was a growing focus on streamlining their supply chain (17% from 14%) and hiring more people (8% from 3%)
[1] https://www.edie.net/british-businesses-brace-for-government-to-slash-energy-bills-support-scheme/
The level of caution that we are seeing in these results is understandable. Still reeling from the effects of the pandemic, Brexit, a cost-of-living crisis and soaring inflation, small businesses are becoming accustomed to major issues that create choppy waters. While there are positive signs of confidence, these are underpinned by a continued feeling of uncertainty. Until these doubts pass, small businesses are likely to remain cautious in their plans.
Jo Morris
Head of Insight
Novuna Business Finance
Note to editors
The research was conducted by YouGov among a representative sample of 1,106 small business decision makers between 9-20th January 2023, spanning all key industry sectors.