The changing ways small businesses manage risk
November 1st, 2015 by Lucy Purdy
Managing and taking risks are part of the job when running a micro or small business in the UK. After all, business owners are at the frontier of the entrepreneurial world, sometimes choosing to risk their entire livelihoods to establish and grow their business.
The risks that micro and small business owners have to contend with are constantly evolving. Unfortunately they think that these risks are getting more complex and onerous.*
They respond to this by trying to manage that risk by being more and more cautious in both how to manage their expenditure and their commitment to invest.
The new risks that small business owners are becoming more concerned about include many that they feel they can do little to prevent. But we argue that this is an opportunity for original new propositions and offers for those who want to market to this sector.
Some of the enhanced risks which small business owners talk to us about are:
- Financial and cashflow risk due to customers who pay too late or not at all The latest research by Intuit** identifies that the UK’s small and micro businesses are collectively owed about £17bn in late payments. They are spending 19 days a year chasing payments.
- Risk with taxation and regulation changes. Taxation and benefit obligations change frequently for small employers – for example with the introduction of the new mandatory employer pension schemes – and human resource planning for these adds complexity to employment risks. Health and safety regs are changing all the time; they can have high impact on small businesses in specific fields like construction, facilities management support etc.
- Risks associated with becoming more technology-dependent. Small businesses now integrate new technology innovation into what they do in order to achieve more than just efficiency savings. Technology has become important to the added value of the offer to customers and to the drive to stay competitive and fast-footed. Increasing dependency on technology and the demand for it be completely reliable adds to business risks as well as opportunities.
- The potential for employees to make disastrous errors which cost the business money and/or customers, is always at the back of the mind of the small business owner. Small and micro businesses with fewer than 99 employees have added about a quarter of a million employees in the 3 years since 2010*** Employers have not always had the time to train and induct them properly.
So when developing a new proposition for this sector, marketing should consider how the new offer can mitigate risk as well as add value to the life of the business owner
- Flexible payment terms or pay as you go contracts which are open to adjustment
- Free knowledgeable information and advice on any relevant regulatory changes that impact your sector
- Favourable rates on back-up guarantees, disaster recovery or insurance cover to support new technology sales
- Free training for employees on important new products or services.
Business owners do appear to be far more cautious now than before the recession and are more reluctant to make commitments for investment. Appeal to their new sense of caution, by being empathetic to this new range of risks that they are having to manage.
* Rainmakers CSI report: Small Business is Back – the Growth Opportunity
** Research from Intuit Quickbooks, June 2015
*** Based on ONS employment statistics 2013 data
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