Forward planning, hard work and a dash of creativity are the crucial ingredients of any new enterprise.
The number of small and medium-sized businesses (SMBs) in the UK continues to rise, as more people choose to set up their own firms. Figures from Companies House reveal a steady increase in business registrations over the last 18 months, with entrepreneurialism seemingly booming since the 2008-09 recession. Company closures during the downturn have created market opportunities for energetic new enterprises, and ambitious individuals have stepped in to fill the void with their own new firms.
At the same time, the government has taken a number of steps to promote start-up enterprises, such as reducing the rate of small business corporation tax, cutting back on red tape and encouraging the banks to provide credit. The labour market downturn has seen many people lose their jobs, particularly in the public sector, and some have responded by setting up their own firms. Rather than seeking a return to the workplace, people are using their existing skills and experience to enter the world of self-employment.
Starting up a small business
Getting started can seem a little daunting – what exactly makes a successful enterprise? Perhaps the single most important ingredient for any new SMB is an original business idea. Entrepreneurs do not need to re-invent the wheel, but they should be able provide a product or service for which there is genuine market demand. This could be on a national or global scale, or simply fill a gap they have identified in the local community. A unique selling point is important for any entrepreneur looking to form a successful business, particularly if they are up against better- established competitors.
SMB founders should always take the time to conduct market research before committing funds to their enterprise. A failure to do so can result in people making the wrong decisions in business and ultimately losing their investment. New companies may fare well or badly depending on a number of factors, not merely the product or service, with location, timing and economic factors all important when creating an SMB. Company founders should assess the potential risks and benefits, and on the basis of their assessment, devise a structured business plan around realistic, achievable end goals.
Writing the business plan is one of the most important tasks for any start-up – it helps collate ideas and set targets, while focusing the individual on the viability of the enterprise. Without a sound business strategy, SMBs will find it very difficult to attract external finance from the banks or other sources – and this can kill the enterprise before it has even got going. As the entrepreneur moves along with the business, the strategic plan should be regularly reviewed and updated – helping them remain focused on what they are doing.
Getting started: Targeting SMB customers
The level of custom an SMB obtains will ultimately determine how successful the company is as a commercial entity. As such, it is vital to begin the process of attracting customers as soon as possible. Sales and marketing holds the key to the whole enterprise – if SMBs are unable to advertise themselves effectively and attract trade, they will quickly go out of business. As such, the marketing plan must be given close scrutiny, and sufficient time and finance must be invested in this arm of the company.
In the current economic environment, it is crucial for SMBs to establish and maintain healthy cashflow. Only then will the banks take credit applications seriously, and will business owners have the opportunity to expand their operations. Cashflow is important from a practical point of view – SMBs need to pay their suppliers on time in order to establish a good reputation. They also need to have ready and available resources in order to meet customer demands. The SMB owner may not make a significant profit for some time after forming their company, but they must at the very least be able to cover costs during the early stages of the project.
Making an SMB a success
Ultimately, the success of the SMB relies on the quality of the service, the ability of the company to reach out to customers, and the amount of time and energy the owner is able to dedicate to the enterprise. If a business owner is unable to fully commit to their company, this is likely to be reflected in the results. Many people do run successful businesses in evenings and weekends to complement their employment, but the rewards associated with such micro-ventures are inevitably smaller than those possible through a fully-functioning SMB.
Small enterprise bosses need to fully believe in what they are achieving, and look for support from family, friends and where applicable, investors. Very rarely can entrepreneurs create successful companies in isolation – they need external help to take the weight off their shoulders. Initially, support can come from volunteers, through business mentoring schemes or from professional service providers. Business partners such as Microsoft can make a big difference to SMBs, providing valuable assistance with administrative, financial management, and sales and marketing tasks. This can allow the SMB boss to concentrate on their main duties – reaching out to customers and establishing a market presence for their enterprise.
SMBs are everywhere in the UK – 99 per cent of British companies fall into this category. As such, they have a vital role to play in the UK’s economic recovery, and the return to health of the public finances. The government has recognised this, with its policies on tax, regulation and SMB finances evidencing the point. As such, despite the difficult economic environment, there has rarely been a better time for people to set up their own companies.
Not every new enterprise can be an immediate success, and some SMBs inevitably fail to establish themselves. But for those entrepreneurs who do find a niche for their services, self-employment can be extremely rewarding. All business founders can do is ensure they plan thoroughly for the launch of their enterprise, take steps to minimise risks and work hard to establish a market foothold. This will give them a chance of enjoying the working life they had always dreamed of – as an employer, rather than an employee.