More than three in four small business owners (78%) are working on plans to strengthen their enterprises in the next 12-months, with the top priorities being to increase sales income (48%), to launch new service lines (28%), reduce the fixed costs (23%) and to build up financial reserves (23%).
These new research findings from Hitachi Capital Business Finance come at a time when the country prepares for the ending of COVID restrictions and the small business sector gears up for a period of recovery. Hitachi Capital’s Business Barometer research also found that the percentage of small business owners predicting growth has soared from 26% to 36% since January, with growth forecasts recovering in troubled sectors such as retail, hospitality and construction.
With small business confidence at a two-year high, Hitachi Capital asked a nationally representative sample of 1,306 small business owners which initiatives they were prioritising in the next 12-months to make their business stronger.
Beyond boosting income, launching new services and managing costs, the other notable priorities for small business owners for the year ahead were to: spend money on online marketing to support brand awareness and sales (18%), plan ahead with business budgeting (16%), invest in staff development (16%) and improve the digital capabilities of the business (15%). Set against a focus on expansion and sales, the research also suggested that contingency planning has taken a backseat for the foreseeable future. The proportion of businesses looking to make contingency plans has fallen from 21% to 13% over a six-month period.
Sectors driving growth plans
The industry sectors where business owners were most likely to be prioritising growth initiatives were also those sectors that had struggled the most during a year of lockdown.
- Small businesses in the manufacturing sector were most likely to be prioritising the increase of income and new business in the next year (68%, compared to a national average of 48%).
- The launch of new service lines and a push to diversify the business was most prevalent among enterprises in the retail sector (45%, compared to a national average of 28%).
- In the hospitality sector, small business owners were those most focused on building up financial reserves (30%), whilst reducing fixed costs was a top priority of small business in manufacturing, construction and retail (27% for each)
Need for finance to support growth plans
More than half of small business owners (53%) said they would need more finance to see their expansion plans come to fruition over the next 12-months. Finance was most likely to be needed to help business owners hire new people (27%), launch new services and products (25%) and to help them to compete with larger competitors (23%).
Interestingly, more companies this quarter will need an injection of funds to either move to a better location or a bigger office space (19%), whilst others need finance to invest in new production lines and machinery (18%).
Joanna Morris, Head of Insight at Hitachi Capital Business Finance comments: “As we all re-emerge from a succession of lockdowns, small businesses are eager to expand over the coming months, having had such an uncertain time of it throughout 2020. Small businesses are the bedrock of the UK economy, so it is encouraging to see that they are still standing tall and looking forward optimistically at a time when many larger organisations are evaluating the impact of COVID-19.
“As a provider of alternative finance, it is reassuring to see so many small business owners positivity planning for the future and expansion plans being made. However, making plans is one thing, affording them is another and for many enterprises there is a clear need for finance. We’ve been working closely with the small business community throughout the pandemic and as business owners get back on track, we want to reassure them that we are by their side when help is needed most.”
Top ten priorities small businesses are strengthening the company over the next 12 months
% of small businesses in the UK
Increasing new business income/ sales
Diversifying the business, offering new service lines/ products
Reducing fixed costs
Building up financial reserves
Invest more money in marketing the business to raise awareness of our brand and services
Advertising online to increase awareness or sales
Spending time investing in the people that already work at the company
Planning ahead with business budgeting
Investing more time/ money to improve the digital the capabilities of the business
Hiring young people that we can train and develop
Percentage of small business owners that predict growth for the next three months: Quarterly results.
% that predict net growth in the next three months
(Net: significant and modest/organic growth)
% that predict significant expansion
The research was conducted by YouGov among a representative sample of 1,306 small business decision makers between 24 March and 1 April 2021 spanning industry sectors.