A new report by international insurer Hiscox has revealed that while many SMEs worldwide have experienced a third year of growth, they feel it is despite Government intervention rather than because of it.
The Determination of the Entrepreneur
The Hiscox 8th annual DNA of an Entrepreneur Study is based on responses from 4,000 owners and senior executives in businesses with fewer than 50 employees across France, Germany, The Netherlands, Spain, the United Kingdom and the USA.
In his introduction, Bronek Masojada, Chief Executive Officer at Hiscox noted the “bullish tone” of the report and the encouraging signs of small business growth.
“For the first time in many years, the majority of small businesses in all six countries are advancing in lock-step, with rising revenues, growth in new customers and improving order books. Investment has beaten expectations, particularly in continental Europe. While new job creation has lagged the upturn in the past year, one-in-five firms says it intends to hire in the year ahead.”
Major Themes for Small Businesses
Mr Masojada also summarised the key themes that emerged in the report.
“Large numbers of the business owners and managers… see their government as unsupportive.” Overall, only 28% of small business owners and managers felt their government was supportive of entrepreneurs, with only 14% of French entrepreneurs believing their government supports entrepreneurs. Over a third also said political instability within their country was having a negative impact on their business.
“It is notable that small businesses in all the countries covered are now enjoying a positive growth phase, with several indicators pointing to another good year ahead,” said Mr Masojada. “SMEs are the engines of growth and it is vital their interests are taken into account by policy-makers.”
“The larger firms we contacted are unquestionably doing better than the smallest.” This, he says, is because the smallest businesses continue to have difficulty in accessing bank funding, and while many find ingenious ways to finance their businesses, others turn to less wise options such as credit cards.
While two thirds of all businesses across all six countries had experienced revenue growth, this proportion rose to four-fifths among those businesses with an turnover of over £10m.
“Small business owners and managers see long hours and hard work as the key to success.” Nearly half always intended to be their own boss one day, and they are also the entrepreneurs who tend to work the longest hours – but most stick with it not for the money, but the flexibility and control over their lives and their work.
The report also revealed that:
Optimism levels have declined slightly (with the exception of Germany, where optimism was at its highest for four years) and staff hiring rates were down, although 21% of businesses were more optimistic about hiring in the future, intending to hire more staff in the next year.
More firms are seeking alternative sources of funding – unsurprising given that 22% of respondents said access to bank funding has become more difficult to access (up from 19% a year ago). One-in-six respondents (17%) now uses their credit card to help fund the business, while one-in-ten is contemplating turning to crowd sourcing and peer-to-peer lending sites in the coming year. Around one-in-six (17%) firms with a turnover in excess of £10 million is contemplating raising finance in this way – four times as many as last year (4%). For the first time, the study also reveals that 40% of those who have set up their business within the past four years are relying on income from outside sources.
There is rising acceptance of social media, with more than a third of small business owners and managers are positive about using social media in their business, with Dutch and US respondents the most positive. Younger respondents are most likely to embrace social media.
11% of SMEs had suffered a cyber attack while a further 8% said they did not know. 26% of victims said the attack had resulted in serious loss, yet only 16% had been able to make an insurance claim. Just 8% of respondents said they had e-risks insurance.
Portrait of Small Business in the UK
The report from Hiscox also showed that nearly two thirds of British businesses have achieved higher revenue and higher profits in the last year, with 60% of UK respondents optimistic about the prospects for their business over the next year. However, it’s worth noting that the survey on which the report is based took place before the EU referendum.
16% struggled with bank funding and a worrying 17% admitted to using credit cards to finance their business.
The number of SMEs reporting late payment issues had risen from 27% to 32%.
Only 35% believed that government polices supported entrepreneurs (down from 45% last year), naming a reduction in direct taxation, simpler accounting rules and stimulation of lending as their top 3 most wanted changes.
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