More than three in four small business owners (77%) are priotising new initiatives for 2020 to make their business stronger.
With 2019 being characterised by market uncertainty and static growth forecasts, it appears that small business leaders are starting the new year with a different set of priorities. Over a third say they are looking to improve sales (38%) – but those looking to cut back on costs have significantly dropped from 35% to 20%.
The latest figures from Hitachi Capital Business Finance give a first indication that small businesses are starting 2020 with an expansionist mindset. The nationally representative poll of 1,196 business owners suggests there are three key factors powering the small business community’s ambitions for increased revenues and growth.
1. Diversification and innovation
Supporting a focus on sales growth, around one in four (24%) of business owners are keen to diversify their business in 2020, launching new services and products. To prepare for sales growth, 16% of small businesses plan to do more marketing in 2020 to raise brand awareness, with online advertising seen to be a key channel for reaching new customers. Further, 11% of business owners plan to invest more money to improve the digital capabilities of their business – this coming at a time when 10% say they want to expand into new geographical markets during the year ahead.
2. Investing in people
Talent management is high on the priority list for small business owners in 2020 – and the focus is to develop talent organically rather than to buy it in. While 6% of small businesses plan to hire senior people, 15% are placing greater emphasis on developing the skills of the staff they already have – with 10% of business owners saying they will invest more money in staff training and e-learning. When it comes to increasing headcount, small businesses are more likely to hire young people that they can train and develop over time (11%).
3. Prudent financial planning
After a year of unprecedented political and economic uncertainty, small businesses show signs of embracing the unknown and are factoring this into their financial planning for 2020. Overall, 15% of respondents say they are doing more forward-planning with their budgets, 11% are putting in place more far-ranging contingency plans to anticipate market uncertainty – with 5% building greater flexibility into their year-ahead forecasts to allow for greater seasonality. Overall, financial strength is a key issue for one in five businesses (21%) who say they are doing more to build up their financial reserves for the year ahead. Also, 10% of business owners are looking to make back-office efficiencies – this at a time when broadly the same proportion of businesses are investing more in online sales and marketing.
Looking at the findings by industry sector, manufacturing emerges as the sector where small businesses are most likely to predict sales growth (54%), whereas those enterprises in the retail sector are most likely to recognise the need to diversify their business – to broaden their product range and services (36%) in order to compete in a faster-placed, digitised landscape.
Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance said: “Last year small businesses had to adapt to a period of protracted Brexit uncertainty and the economic ripple it delivered to sectors across the UK. We start 2020 with far greater certainty and our research suggests small businesses have switched from staying afloat through cost-cutting to a new era of planning for sales growth, investing in people and product diversification to boost bottom-line growth. While 10% of business leaders are investing in training, the remaining 90% should be giving this serious thought, and what options that are available to businesses.
“Our research also suggests that more small business owners recognise the need to adopt flexibility in their budgeting, whilst safeguarding their financial strength by building up their financial reserves. These factors point towards 2020 being a year when more small businesses will be looking for finance to help to realise their growth ambitions. We would encourage business owners to shop around, to look beyond the high street lenders and talk to specialists that can offer flexible solutions that are tailored to the needs of their business.”