By Nick Gould, corporate partner at Collyer Bristow
Why are British small-to-medium-sized businesses (SMEs) so often ignored – or even regarded in such a negative way – by so many people and organisations? It seems strange that these up-and-coming, frequently dynamic businesses – which in 2013 employed 14.4 million people and generated a combined turnover of £1,600 billion (source: Federation of Small Businesses) – should be regularly overlooked. SMEs account for 99 per cent of all private-sector businesses in the UK, yet graduates (by way of example) tend to obsess over big players, lenders often give SMEs a wide berth, and many professional services firms seem put off by anything smaller than a multinational, or at least a large national.
Here are my first four reasons why I believe SMEs are overlooked and why not overlooking them represents a real opportunity for professional services firms…
1) The term itself
‘SME’ covers so many bases that it’s almost useless for any sort of detailed analysis – officially it refers to any business with 10-249 employees (zero to nine employees is a micro-business). Because so many outfits are lumped under the SME umbrella, there is a lack of understanding about what they actually are and why they are important. However, by thinking more deeply about this sector and working out its nuances, it’s possible to identify some real opportunities.
2) High mortality rate
It’s true that there is a higher turnover in the SME sector, with a far greater birth and death rate compared to big companies. This lack of security can make SMEs unattractive to those seeking a steady relationship. But it’s wrong to assume all SMEs are in danger of folding: there are vast numbers of very well established small-to-medium-sized companies that have excellent prospects.
3) Weaker brand presence
Professionals and graduates often ignore SMEs because they are conditioned to be competitive and aim for what they are told are ‘the best’ – the best in such cases apparently being the FTSE and similar companies (business), Magic and Silver Circle (law) and Big Four (accountancy). This conditioning to aim big isn’t necessarily as clever as it looks – remember that the SME sector is home to innovative, highly entrepreneurial players; some of which could well be the market leaders or drivers of tomorrow. It’s also ‘different strokes for different folks’
This is a core reason for SMEs failing to attract the attention of many professionals. Price is often the highest priority and most SMEs simply cannot compete with the largest companies due to economies of scale. However, it’s worth bearing in mind that long-term positive relationships that are also highly profitable – both commercially and otherwise – can come out of working with smaller players.
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