According to the Entrepreneur’s Alliance, over half a million people started their own business in 2013, and over 70% of businesses are starting from home, thus aiding their local economy. With a strong start from 2013, 2014 is set to increase employment further; however, despite small businesses contributing to their local economies, SMEs have begun to experience a number of barriers having the potential to damage their performance.
Budget Restrictions Preventing Website Efficiency
Whilst small businesses are well aware of the growing trend of digital marketing, many appear to be lacking financial investment in this area. Only 28% of SMEs at The Business Show in December reported that they were happy with their SEO Google ranking, however only 43% had invested in the restructure or design of their website, something in which their larger competitors may well take advantage of. Furthermore, a staggering 91% of SME websites are not accessible for mobile phones. Considering the increasing trend of ‘showrooming’ in retail; with shoppers comparing products in stores only to purchase from rivals, M-Commerce may well dominate the future of digital marketing and SMEs could be left behind.
Chasing Large Companies for Payment
According to The Department for Business, 4,000 UK businesses failed in 2008 as a direct consequence of late payment. Despite the number of signatories on the Prompt Payment Code launched last year, small business may spend a large amount of 2014 chasing payments from the larger, rather than the smaller companies they work with. Unlike many SMEs, the larger corporations are more likely to operate within a slower payment term, considering factors for authorisation within the company and approved suppliers lists. With further analysis showing that SMEs were forced to spend an average of half a day per week to pursue payments, many of which were late from large corporates, the time and financial loss here from these inflexible and costly contracts makes it difficult for SMEs to plan for the future and invest further.
Big Banks Blocking Finance Attempts
Not only are banks refusing to lend to small businesses that do not currently have an account with them, it appears that they are prolonging the process of gaining finance elsewhere. SMEs are now looking elsewhere for finance, such as peer-to-peer lending from family and friends, and even through online social lending initiatives, however these bring an element of transparency to the business’s finances. Small businesses are at the heart of the economy, with economies growing when its SME sector is vibrant. However, due to these barriers to small business success, SMEs may struggle to progress to their full potential by overcoming such obstacles and keeping up with competitors. Image courtesy of Stuart Miles @ Freedigitalphotos.net