SMEs are more enthusiastic about running their business, with more than half predicting strong growth in the first half of 2014
New research from Aviva, the UK's largest insurer, reveals that whilst many SMEs are entering 2014 with renewed optimism and enthusiasm for running their business, they also recognise the need to take extra steps to keep their business healthy in the first six months of 2014.
According to the insurer's bi-annual SME Pulse, which surveys 500 SMEs, businesses have a more positive outlook for the first six months of 2014 compared to the same period in 2012. More than half (52%) of those surveyed predict strong or improved growth for their businesses during the first six month of this year, a three-fold increase on what had been predicted for the same period in 2012 (19%).
Looking at expectations on trading conditions nearly two thirds of the survey respondents (62%) say trading conditions in 2013 have been largely as they expected (36% in 2012) and one third (34%) say conditions have been tougher than they initially expected (43% in 2012).
Reflecting the recent positive economic forecasts, Aviva's findings highlight higher levels of enthusiasm and satisfaction among UK entrepreneurs. When asked in 2012 32% said they had lost the initial enthusiasm they had for running their business, but in the 2014 survey this drops dramatically to less than one in ten (8%).
Just 4% say they would consider a return to the workforce as an employee – six times fewer in comparison to the same period from 2012 (25%) suggesting more businesses are enjoying being their own boss.
Contrary to common misperceptions that running your own business can be all-consuming and a 24/7 job, the survey found that many small business owners enjoy a balanced lifestyle. Two fifths (41%) feel they have good work-life balance and just under one in ten (9%) believe that running their business has a negative impact on their relationships with family and friends.
Robert Ledger, head of small business at Aviva, says:
"The increased optimism we are seeing is great news for the economy with more than half of the SMEs surveyed telling us they predict strong or improved growth in 2014. This supports PwC reports that the UK will remain the fastest growing major European economy in 2014.
"It is also a promising indicator of a return to business confidence to have so many businesses say they still really enjoy what they do. Qualities like passion and commitment to run their own business, especially when trading is tough, really shows the strength that SMEs have, and need, to survive.
"Our survey results also suggest SMEs are interpreting market conditions better with almost two thirds saying trading conditions in 2013 were largely as they expected them to be. Business acumen is really important in judging when to be prudent and when to take opportunities to grow."
Taking measures to aid growth
Aviva's Pulse also shows that SMEs recognise the need to actively manage their business performance in the first six months of 2014, with many taking extra steps to keep their business healthy. Diversification, by expanding their product offering or targeting new customers, has increased 50% since 2012 to become the top step for a third of businesses.
Unsurprisingly the primary concerns for SMEs for the first six months of 2014 remain largely unchanged over the last couple of years with focus on maintaining good cash flow (30%) and halting a decline in sales (19%) coming out as top concerns.
Last year's SME survey for the same period found that 58% of SMEs felt one of the top factors influencing business confidence was having Government initiatives to tackle red tape.
To explore this point further in our latest survey we asked businesses what government could do specifically to help SMEs grow their businesses in 2014 and the top answers were as follows:
What SMEs think the Government should do to help them grow:
• Cut red tape for tax and accounting for small businesses – 33%
• Reduce VAT – 30%
• Encourage the banks to lend to businesses – 24%
• Cut red tape on employment/HR for small businesses – 24%
• Reduce corporation tax for small business owners – 23%
• Create initiatives that benefiting smaller as well as bigger businesses – 19%
• Cut red tape for health and safety for small businesses – 15%
• More SMEs to benefit from employment allowance (reduce National Insurance bills) – 11%
Ledger continues: "Our research found that almost a third of SMEs turn to the internet when they have a problem so the launch of initiatives like the Great Business website last November are a great source of information and a clear indication that the government is looking to provide further support and guidance to the 4.9million businesses in the UK.
"Despite this, and the widespread availability of information and guidance such as Aviva's own website "Cut Red Tape" the UK's SME business owners continue to call on the government to do more to support business growth, in particular by minimising red tape and reducing VAT and taxation for SMEs.
"It is too early to say whether the two year Government plan to help SMEs bid for government contracts will help smaller businesses as well as larger ones. Certainly initiatives like the Great Business website and making public sector contracts more accessible are steps in the right direction. It will be interesting to see how this plan develops over the next year."
SMEs operating without suitable insurance cover
Businesses are becoming increasingly savvy about the importance of business insurance. Aviva's SME Pulse research reveals that business leaders feel they understand their insurance needs better. In 2012 around half of SMEs were confident they had the right insurance but this figure has increased to 69% in 2014.
However, the research also reveals that 21% of SMEs don't understand what insurance they need or are covered for. Indeed, 10% of businesses said they possessed no insurance at all.
Ledger adds: "It is great to see an increased confidence among SMEs that they have the right insurance.
"However, worryingly, one in five admitted being unsure that they have the right insurance for their business. Add that to the ten percent who say they are operating without any insurance cover and it shows that there are still too many businesses leaving themselves in a vulnerable position.
"Protecting everything you have taken the time and money to invest in makes perfect sense and my simple advice is to review your policy regularly, especially if you change the way your business operates, for example, by diversifying what you do, to make sure you have the right cover.
"Make it a priority to check out your insurance needs and remember that in some cases insurance may be a legal requirement. If in doubt speak to an insurance broker to check out your position or for further information visit www.aviva.co.uk/yourbusiness/."