Small Businesses ready to capitalise on 2010

Small businesses are weathering the financial storm to head into 2010 in better financial health than this time last year, according to the findings of a study by O2.

O2’s Small Business Confidence Index questioned nearly 3,000 small business owners to gauge how the community has responded to the economic climate in 2009. The findings reveal a small business community that has streamlined operations in the last 12 months to capitalise on anticipated economic improvement on 2010.

Over a quarter of the business questioned revealed they are now financially stronger than a year ago. Almost a third (32 per cent) cited that they feel more confident now than this time last year.

Small Business Confidence & Profitability

Reducing stock levels, renegotiating payment terms with suppliers and tightening credit control were all cited as among the most popular methods taken by businesses to improve working capital. Freezing pay and introducing unpaid holidays were also identified as ways to help improve the financial health of businesses. It follows widespread redundancies throughout the sector with nearly four out of ten (39 per cent) of businesses revealing they had cut staff, compared to 1 in 100 businesses 6 months ago.

Feedback from business owners reveals an air of optimism with more than half (59 per cent) expecting these changes to see their businesses perform better 2010 in comparison to 2009. An upbeat third (35 per cent) predict increased profits in the next three months.

Economic recovery

Economic uncertainty and poor consumer confidence remains the single biggest concern for the small business owners in 2010, with the majority (69 per cent) per cent citing that the UK economy is still in recession.

When questioned on the progress of economic improvement, 27 per cent of businesses predicted recovery to be ‘v-shaped’ expecting the economy to get worse in the early part of 2010 but followed by significant improvement. 14 per cent predicted a ‘w-shaped’ curve, with current signs of economic improvement to be followed by a significant decline towards the end of next year. Treasury sources have indicated in recent reports that Alistair Darling is likely to stick to his forecast for economic growth of 1 per cent to 1.5 per cent in 2010, with growth resuming at the turn of the year.

Other key concerns for small business owners next year include the impending VAT increase (38 per cent), an increase in interest rates (30 per cent) and reluctance from the banks to change lending policies (34 per cent).

The weakening pound

Despite the impact of the recession on the value of the pound, 62 per cent of small businesses owners cited that their businesses had been unaffected by its depreciation. More than one in ten (12 per cent) claimed to have benefited from an increase in demand for products and services from customers outside the UK.

Entrepreneur and star of BBC Online Dragons’ Den Shaf Rasul comments: “Throughout a year of the deepest recession on record, small businesses have been finding ways to adapt to the climate and, in some cases, even use it to their advantage ‘ and they are now entering 2010 ready to fight. The current mood, while cautious and realistic, is by no means bleak, and these findings really are testament to the resilience of the UK small business sector.’

Investment in technology

Feedback from businesses reveals a small business community that has continued to invest in technology despite the recession.

Nearly two thirds (65 per cent) of the businesses questioned claimed it had actively helped their business, citing greater staff flexibilities and the ability to keep in touch with customers and suppliers as the greatest benefits. 3 in 10 (30 per cent) claimed that the investment had enabled them to save money by cutting back on fixed office space. Nearly half of the respondents (44 per cent) revealed that technologies such as converged mobile devices and mobile internet had resulted in a more productive work force.

When questioned about technology investment in 2010, two thirds (66 per cent) planned to maintain current expenditure with 16 per cent planning to increase levels of investment. Computer hardware and mobile devices were identified as the most popular products with over 7 out of 10 planning to spend on laptops and desktop PCs and nearly a quarter (24 per cent) on converged devices such as Blackberrys and iPhones. Recognising the increasing complexities of these new devices, over 1 in 10 (11 per cent) of the small businesses owners questioned revealed they plan to invest in technology training for staff.

Simon Devonshire, Head of Small Business Marketing at O2, adds: ‘Small businesses have been quick to recognise and capitalise on the benefits of technology in 2009. While many investment plans have needed to take a back seat this year, the best small businesses are aware that cutting back on technology is simply not an option. As the economy starts to show signs of recovery it is these businesses that are going to emerge ahead of the pack.’

Case studies

Daniel Ox, Fruit For The Office says: ‘Wehave stripped away much of the unnecessary elements ofthe day to day running of our business,through activelyspeaking to suppliers torenegotiatepricing and credit terms, as well as cutting back on all possible costsright down to stationery and diesel. All previous sales leads have been chased down and we have re-affirmed the benefits of our product to our existing customers. We have also crossed trained some of our employees to fill other roles that were to be filled with full time employees. Most importantlya ‘team effort’ attitude has been encouraged throughout this year. I feel very excited about 2010 – we are coming out of recession with the benefit of the lessons learned during the bad times.

Warren Bardsley of fashion retailer Gorgeous Couture, adds: ‘2010 will be a very exciting time for Gorgeous Couture and we feel we are better placed than we were last year, despite the economic climate. The situation of economic crisis has seen off the weaker businesses and brands and has simply been a survival of the fittest, making the industry leaner and more competitive. We are looking forward to what 2010 holds for our business, especially with the prospect of an improvement in the economic conditions we’ve faced this year.’

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