Tag Archives: small business

Small Business Websites: Why you need to be online

Small Business Websites

Word of mouth is just not enough anymore. To ensure consumers knock at your door, and not your competitor’s, they need to be able to find your business easily. Gone are days when you know all of your neighbours, know what industries they work in, and which local businesses can provide the service or product you’re looking for.

Money Saving Expert, Martin Lewis, warns his readers that “Directory enquiries services are money making machines. Many now charge over £1 per enquiry. Yet there are ways you can call for free from home, on a mobile or enquire free via the web”. We are all looking at ways of cutting unnecessary costs, and searching online instead of using a traditional directory enquiry service is an obvious move. But is finding your business the only thing your customer does when they click to search?

An Ofcom survey from December 2012 found that “UK consumers are a nation of online shoppers”.  For your consumer, searching online is not just a cheaper way to find you; it’s the way to spend their money with you. The survey reported that “more consumers in the UK use the internet for shopping than other major countries”.

Why do UK consumers love to shop online? The BBC report on the survey suggested that the UK’s fondness for net shopping is, in part, driven by mobile devices.” We’re a nation of commuters. The Daily Mail reported that “thousands of British workers now spend an average of 75 minutes each day commuting.” It is easier and faster and a good use of timeto shop on the go.

The same Ofcom survey on UK online shopping also showed that there was a 10% increase in online shopping between 2010 and 2011, we spend more time shopping online than our European counterparts, and Smartphone ownership nearly doubled between the beginning of 2010 and mid 2011. The article is well worth a read, and showed that though growth is occurring globally, it is fastest in the UK. Indeed, “consumers in the UK spend an average of £1,083 a year on internet shopping, compared with Australia which spends the second highest at £842”.

In his article entitled “London’s Moment” in Wired, April 2013, Matt Cowan explores the reasons why the UK online market is the place to be. He references “the Boston Consulting Group’s 2012 report, ‘The Connected World’ [which indicates that] the internet economy’s contribution to the UK GDP is at 8.3%, higher than any other G20 nation’s,” and this figure is forecast to increase. People are ready to spend and, all you need to do is direct their spending towards your business.

Have you got the online presence you need? Are online-shopping-happy Brits going to find you, and then spend their money on your product or service? At The Company Warehouse our dedicated team of consultants can talk you through the best ways to build a bespoke website which can be easily found, is simple to navigate through, and could be the difference between a few word of mouth referrals and the genuine growth your business needs.

Only 35% of Business Feel Understood by their Bank

Much has been written in recent months about the breakdown in relationships between the big high street banks and small businesses. As we discussed the other day the government’s schemes to improve lending to small businesses do not appear to be working. Meanwhile bank bosses have claimed that the problem is not their unwillingness to lend money but the unwillingness of small businesses to apply for loans.

A new breed of challenger banks are increasingly active in the SME market, trying to to differentiate themselves from the big banks by being more approachable and customer friendly. One of these challenger banks is Aldermore. They have conducted some new research with YouGov on the relationship between SMEs and the big banks which suggests that small businesses do not trust their bank to look after them and that the big banks do not cater to their needs. While Aldermore clearly have a bit of a vested interest in this research, the results are certainly indicative of the wider issues in the small business banking market.

Aldermore small business banking infographic

Where do Small Businesses get their Sales Leads?

We took a look at the Success in Challenging Times: Key Lessons for UK SMEs report from the University of Surrey a couple of days ago. We have already written a blog post on its findings about how start-ups and small businesses finance themselves. But the research covers some other interesting areas including the networks that small businesses in the UK use to generate leads and grow their profile.

It is easy to spend a lot of money very quickly on advertising and marketing without getting much of a return. For many businesses the key to success is getting their products and services in front of the right people at the right time. While there are lots of excellent marketing books out there it is also useful to know what real small businesses think are the best ways to promote their businesses. The University of Surrey research asked people to grade different types of networking activity on a scale from ‘Not Important at All’ to ‘Extremely Important’. Taking the figures from the important side of this scale we can see that small businesses consider a wide range of networking activities to have some importance. By far the most important networking activity was found to be earning direct referrals to their business through personal contacts. This supports what most marketing research says in that face to face referrals are the best form of advertising any business could have. The fact that SEO shows up as the second most important factor shows the continuing importance websites as a marketing tool for small businesses.

Networking for small businesses

The rest of the networking activities that small businesses found to be important were a mix of online and offline activities. Chambers of Commerce meetings and Business Mentors were both seen as important (although the researchers point out that a large proportion of their survey sample were Chambers of Commerce members, perhaps distorting the figures). It is interesting that different online social networks varied in importance with Linkedin being seen as important by 44% of small businesses but Facebook seen as important by only 24% of small businesses.

However when we look at the networking activities that small businesses felt were ‘Extremely Important’ we can see that the ratings for all of the social networks drop below 10%. In fact the only networking activities that are really seen as being Extremely Important are direct personal referrals and website marketing through Search Engine Optimization. The University of Surrey research also found that creating websites is one of the most common things for small businesses to outsource.

Networking Activities for small Business

So if you are starting or trying to build a small business then getting a website built is going to be important. However the most important thing that you can do to promote your business is encourage your network to make direct referrals to your business.

The Life of an Entrepreneur: Reasonable hours, job satisfaction but lots of worry

Hiscox report on attitudes of entrepreneursInsurers Hiscox have published their latest report into attitudes among entrepreneurs and those running SME businesses. Their report compares attitudes in the UK with similar business people in the USA, Germany, France, Spain and Holland. Although the report does not focus on new businesses it does have some interesting insights for those thinking about starting their own business.

The majority (61%) of the British business people in the survey thought that bureaucracy was a serious problem for people who want to start a business. However the British business people also reported spending the least amount of time dealing with that bureaucracy every year, spending 96 hours a year compared to 160 hours per year in Germany. Interestingly women in the survey reported spending nearly 30% less time dealing with red tape than men.

While red tape is seen as a problem by entrepreneurs, especially male ones, they also report working pretty reasonable hours. UK based entrepreneurs reported working an average of 38.5 hours per week, the least of all the countries surveyed. The Germans reported working the longest hours, averaging over 47 hours per week. Working hours also seem to be one of the big incentives for being an entrepreneur with 55% saying that flexible working hours were a major benefit of running their own business. Overall 54% of British entrepreneurs said they were happier running their own business than they would be working for someone else. After flexible working hours the biggest benefits cited were in being in control and being able to influence the direction of the business.

As well as reporting reasonable working hours and plenty of job satisfaction 41% of UK small businesses in the survey also reported increased profits. However 42% also reported that their stress levels had increased over the last year, 27% reported sleeplessness and 20% reported a fear of personal bankruptcy.

So what we can learn from this report is that the UK is not a bad place to be an entrepreneur, we have relatively low amounts of red tape, short working hours and high job satisfaction. However being an entrepreneur can be stressful and comes with financial risks. As we have seen from other reports though, many people see the stress and risk as being worth it and becoming an entrepreneur is an ever more popular career choice.

FSB Find Small Businesses Create Most Jobs

The Federation of Small Businesses have published some new research into the impact of Britain’s SMEs on the job market. They claim, not only that small businesses are more consistent in employing people, but that they are also more likely to hire the young, unemployed or inactive.

They have published this handy infographic to summarise their findings.

FSB Small Business Jobs Infographic

Local Banking for the Small Business Market

This week the government hinted that they are moving towards a government backed ‘business bank’. This is something which has been called forSME bank funding by a number of organisations including the Labour Party, British Chambers of Commerce and Federation of Small Businesses. Some of these groups have suggested that the German KFW would be a good model for the government to use. In their Alt+ Finance report the Federation of Small Businesses (FSB) took a detailed look at the KFW model and how it could be applied to the UK market.

One of the issues the FSB report highlighted was the types of banks in Germany and in the UK. The German KFW mainly distributes money through small locally focussed banks. It is these types of institutions which most small businesses bank with. In the UK the banking market is dominated by ‘the big four’. It is these banks which are said to be refusing a third of small business loan applications and which have been guilty of misspelling complex insurance products to small businesses.

Business groups and politicians are now looking to bypass the big four in finding funding for start-ups and small businesses. A wide variety of options have been discussed from crowdfunding and invoice factoring to the rise of ‘challenger banks’.

Challenger banks exist in order to provide an alternative to the big four. For some banks like the Co-operative this is about being ethical in their business practices and investments. For other banks like Aldermore it is about targeting areas of traditional banking which the big four have largely abandoned, such as lending to SMEs. For the Swedish Handelsbanken it is about building personal relationships where loan decisions are made in the local branch by staff who have an existing relationship the business involved.

The last couple of years has also seen an increasing number of the kind locally focussed banks which the German’s rely on. Perhaps the most famous of these is the ‘Bank of Dave’ in Burnley which was the subject of a recent TV series. Close to our Essex base we have the Shawbrook Bank and the Cambridge and Counties Bank. Like Aldermore both of these institutions are focussed on lending to SMEs and providing traditional ‘no nonsense’ relationship banking.

The British Chambers of Commerce has described the relationship between the UK banking and business sectors as ‘damaged’ and characterised by a ‘lack of trust’. The relationship having deteriorated to the point where small businesses are not willing to approach the big banks for loans. It is hoped that the new local banks and challenger banks can start to repair this relationship and help small businesses to grow. So if you are looking for funding for your business it is worth remembering that your options do not begin and end with the big four.

Government “Small Business Bank” Being Discussed

Funding for small businessesIt is widely recognised that small businesses are struggling to get funding from the mainstream banks. The scale of this problem is such that it is said to be holding back the whole UK economy. As a result The Labour Party, The British Chambers of Commerce and the Federation of Small Businesses have all called for the creation of a UK business bank.

The government have been dropping heavy hints about creating a new “small business bank” over the last week or two. Many newspapers have greeted these hints with headlines stating that the government has launched or confirmed a small business bank.

So far the government has not announced any details on what they are planning to do. Official statements from the government are only using the phrase ‘business bank’ in inverted commas and are instead referring to the establishment of ‘a new institution’. They have also made it clear that whatever this ‘new institution’ might be it is very much in the planning phases. They have committed very little to writing and what they have published is in press releases. The fullest statement so far on a business bank comes from a press release on the Department for Business website, it says:

A new institution needs to be created to help companies invest in capital and drive their expansion. The scale and modus operandi of the institution are still under discussion, but it could operate through alternative providers such as the new challenger banks and non-bank lenders.

Not only would this boost their lending capacity, but would also corral existing provision such as co-investment and guarantees to support business expansion.

Reading between the lines in this statement, and taking some of the rumours from press reports, it looks like the government is thinking about creating something along the lines of the German KFW or American SBA. This would be in line with what both the Federation of Small Businesses and the Labour Party have recommended.

Neither the German KFW and American SBA act as banks in the normal sense. They do not typically lend directly to businesses or take deposits. Instead they operate in a layer above the banks. They act as clearing houses for government loan and finance guarantee schemes. The actual money is given to businesses by small, locally focussed, regional banks. As the Federation of Small Business has pointed out one of the issues the UK faces is that we do not really have small locally focussed banks. To fully replicate the success of the German or American schemes the UK government would either need to try and replicate these institutions or alter the model sufficiently to account for their absence.

At the moment all we can do is wait to see what the government decide on. The creation of a full scale bank is unlikely and even the German or American model might be a stretch but only time will tell.

Getting Away with it: Will Companies House Notice if You Fail to File Documents?

Many people don’t realise that when they create a limited company they are taking on a range of duties which have to be completed every year. Many more people fail to realise that the penalty for not meeting these requirements is prosecution.

On forming a company many of the documents needed are not supplied by Companies House. The statutory registers and directors service contracts have to be sourced elsewhere. Once the company is established its annual accounts and annual returns have to be filed every year. This counts for businesses which are not trading as well as those that are. So even if your business fizzles out you cannot simply put it behind you and move on with your life. Unless you formally dissolve the company you are still responsible for filing documents every year. Failure to do so can lead to prosecution.

A lot of people do not take this threat seriously. After all they are not committing a violent crime or hurting anyone. They are just letting the paperwork for a non-existent business go out of date. Unfortunately for them Companies House does take this seriously. According to the Companies House Website:

Our computer system automatically identifies companies that fail to deliver their accounts or annual returns on time.

They do say that their aim is to get the documents which are overdue rather than to prosecute. However they then go onto say that:

All companies, large and small, have a responsibility to file accounts and annual returns on time. Similarly, non-executive / sleeping directors are just as responsible as the ‘main’ director(s).

The message from Companies House is fairly clear. Although you may get away with not filing your accounts for a short period of time they can easily find out what you are up to. If they do decide to prosecute your company then it may not only be you that gets a trip to court. If your husband, wife or children have been made directors of your company then they are all liable for prosecution as well.

If your company accounts are overdue, or if you want to shut down a company you are not using then our accountancy team can help you ought. Get in touch to discuss what we can do to help you.

UK Government Tries to Kickstart Bank Lending (again)

The current unwillingness of the major banks to lend to start-ups and small business has been well documented. Securing funding is the biggest problem for start-ups at the moment. This has contributed to the rising popularity of crowdfunding and alternative peer to peer funding schemes. While the UK government has given financial backing to some of these schemes they have also been trying to fix the problem at source and get the banks to start lending again.

Way back in March the government launched the National Loan Guarantee Scheme to try and stimulate bank lending to small businesses. The basic deal here was that the high street banks would go and borrow money from the international markets. The UK Treasury would guarantee that these loans would be repaid if the money was lent out to SMEs (using the EU definition of an SME having a turnover under £50 million). At the end of July this was extended to include businesses with a turnover up to £250 million. However only weeks after the scheme was extended it has been announced that it is going to be ‘wound down’.

At first glance it looks as though the National Loan Guarantee Scheme was a success. In its first four months £2.5 billion worth of bank loans for SMEs were guaranteed by the Treasury. Set against a total guarantee pot of £20 billion for the whole scheme this looks fairly impressive. However, overall lending to UK businesses actually fell by around £3 billion over the same period. In short although the banks took advantage of the scheme to protect the loans they were making they continued to reduce the number of loans to businesses. Effectively all the scheme achieved was to make the little lending the banks were doing cheaper and less risky for the banks.

The point of the scheme, of course, had been to solve the problem of start-ups and small businesses being unable to borrow money. As the National Loan Guarantee Scheme has clearly failed to do this it is being replaced with Funding for Lending. Funding for Lending sees the UK government taking a much more active role in the process. The National Loan Guarantee Scheme depended on banks borrowing money from the open market and passing this money onto SMEs. Funding for Lending is going to let them borrow from the Bank of England direct and at below market rates.

Essentially this is the taxpayer giving the banks cheap loans so that the banks can lend that money to homeowners and businesses. In exchange the Bank of England will receive assets from the banks in the form of mortgage contracts and other debts. As with the National Loan Guarantee Scheme there is a danger that the banks will just use these loans to subsidise their existing operations and not increase lending. Therefore Funding for Lending has a number of incentives built in. The amount that the banks borrow, and how much it costs them, will depend on how much they lend out. The more they lend, the more they can borrow and the cheaper it gets.

Unlike the National Loan Guarantee Scheme, Funding for Lending is not limited to small businesses or businesses at all. One of the stated goals of the Funding for Lending scheme is to reduce the costs of mortgages in order to stimulate the housing market. The other stated goal is to lend to ‘business’ generally. Ultimately, like the National Loan Guarantee scheme, how much money makes it into the hands of small business will depend on the banks willingness to lend. Offering the banks low risk cheap money did not work, so hopefully offering them direct access to even cheaper money will. Only time will tell.

What is an SME?

Over the last year there have been a lot of accusations flying around about SMEs (Small and Medium Enterprises). Articles have been written denouncing the SME term and claiming that large corporations don’t understand how to talk to small businesses. Meanwhile the UK’s small business sector has been compared unfavourably with Germany’s Mittelstand sector which is at the centre of their thriving manufacturing and export driven economy.

While the UK government has been very focussed on start-ups they have also recently begun to focus more on SMEs. The Business Secretary has announced plans to accelerate the growth of SMEs and has launched a showcase of British manufacturing to coincide with the Olympics.

While there is growing focus on the importance of the SME sector there is one very large fundamental problem with it. That problem is that even with the UK government there is not a single definition of what a small or medium enterprise is. For the purpose of Research and Development Tax Relief HMRC define an SME as a business with not more than 500 employees and an annual turnover not exceeding £100 million. However the rest of the UK government does not use this definition. For the purposes of collecting statistics the Department for Business defines SMEs as companies with less than 250 employees. For accounting purposes Companies House defines a small business as employing less than 50 people and a turnover under £6.5 million and a medium business as less than 250 employees and a turnover under £25.9 million.

To further complicate things other parts of the UK government use the EU definition of an SME which goes:

  • Micro Business = less than 10 employees & turnover under £2 million
  • Small Business = less than 50 employees & turnover under £10 million
  • Medium Business = Less than 250 employees & turnover under £50 million

So depending on which definition you use an SME could have anywhere between 50 and 500 employees and have a turnover between £6.5 million and £50 million. One thing that virtually everyone agrees with is that SMEs account for more than 99% of all UK business and that they employ over 12 million people. This is a vital part of the UK economy and a vital part of growing the economy. One way to get a handle on how to encourage SMEs may be coming up with an accurate definition of what they are.

You can get your business off the right start with our Free Company Formations and Start-up Accountancy Services.