SME Performance Spotlight Report 2022 - Chalkhill Blue
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Executive Summary

If you listen to the news too much, you’d be forgiven for thinking the economy is tanking and the country is about to collapse. And for good reason. We are in the midst of the first major European war since 1945, energy costs have spiralled to eye-watering heights and there’s been a level of political upheaval not seen for decades.

But beyond the hyperbole, the backbone of the UK economy – SMEs – are doing what they do best: thriving. It’s true that GDP was flat in the three months to July 2022, but it has already surpassed the size of the pre-pandemic economy at the start of the year. In short, the small business sector has well and truly recovered from the pandemic.

This positive story amid negativity is reflected in the findings of the second Chalkhill Blue SME Spotlight Report. According to respondents of the survey, revenues, profits and director drawings are up for the vast majority of businesses. There is also an investment boom taking place.

However, this isn’t to say there aren’t significant challenges to overcome. While many of the issues facing business leaders are perennial, cashflow and operational systems are the two top priorities.

We’ve also delved into the minds of business owners this year. It seems many are wracked with self-doubt, imposter syndrome and loneliness. It’s surprisingly common, something that should be a comfort to those who experience it.

We believe the insights of this report will be invaluable in helping readers reflect on their own position so they can build personal resilience and avoid costly and time-consuming mistakes as they continue to generate wealth and provide value to the UK and beyond.

Optimism and Confidence

In a repeat of 2021, leaders are confident about the future. They want to grow, scale-up and thrive. It seems that whatever the world throws at them, they won’t be beaten. The entrepreneurial optimism is ever-present with turnover, net profit and staff numbers set to soar.

Three fifths (60%) say their top priority for the coming year is growth. Reassuringly, just 9% say their top priority is survival. Meanwhile, 88% expect turnover to increase in the next year and 83% expect net profit to grow. Nearly two thirds (66%) say this growth will come organically, although 32% are actively exploring new markets and the same number of respondents are looking for strategic partnerships.

Overall, 72% of business leaders questioned said they were confident in their company’s ability to bounce back or grow in the coming year.

Challenges Remain

This confidence and optimism is great news, but it doesn’t mean the path to success will be smooth. There will be challenges along the way, but business leaders are wise to this and recognise that work is needed to realise goals.

From a strategic perspective, the two biggest challenges cited are accessing and exploiting new customers and markets (51%) and managing periods of rapid growth (35%). To put this another way, the biggest worries are finding and dealing with new clients. These are the same hurdles that businesses faced in 2021 and will probably continue to be in the future.

Of course, winning and keeping clients is just the beginning. Leaders then need to ensure customers pay on time while also managing expenditure. Strengthening cash flow is cited by 57% of businesses – the single biggest challenge facing leaders. A further 34% suggested that aligning finance to growth ambitions was also a challenge.

Boosting productivity is also on the agenda, with 49% of SMEs agreeing it was a challenge. A further 42% say they need to realise increased operational efficiencies.

From a systems perspective, the biggest challenge on the horizon for businesses is leveraging systems to increase organisational profitability, cited by 54% of respondents. Put simply, this means creating efficient and effective processes that cut costs and maximise results and therefore profits. It’s a matter of removing bottlenecks and automating systems to run companies like clockwork.

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