Global slowdown to see rise of super SMEs

Research by Plantronics, the headsets vendor, has found that small to medium size enterprises maintaining investment in IT infrastructure, staff training and marketing are best placed to survive the recession.

The survey of 1,096 owners, managers and IT directors of SMEs found that while almost two thirds (67%) of SMEs are expecting to see a reduction in financial turnover in the next six months, 21% indicate that the slowdown is either having no effect on their business or that business is booming. These ‘Super SMEs’ have all increased or maintained levels of investment in one of the three key areas; IT infrastructure, staff training and marketing and are confident about the future.

Plantronics say that whilst the UK economy has not yet officially slipped into recession, 80% of SMEs surveyed said they have been feeling the effects of a slowdown for quite some time with 22% claiming that the negative impact on their business had already been significant. Alarmingly the study found that three out of ten SMEs across Britain expect to fail by autumn 2009 with 7% forecasting failure within the next six months.

Across the country 66% of SMEs expect profits to fall in the next six months, with the outlook most pessimistic in the East of England (79%). SMEs in the Midlands are most confident about 2009 with just a quarter (25%) forecasting a fall in profits. Across the board 43% of all SMEs expect to reduce staffing levels over the next six months but the sectors where cuts will be highest are retail, construction, manufacturing and catering – with over half of SMEs in these areas expecting to see staffing levels reduce significantly.

Thanks to the lengthy period of prosperity experienced in the UK over the past 20 years, 62% of SME managers said they had never faced a slowdown before evidenced by their lack of planning for lean times. The study highlighted that six out of ten did not have a plan or strategy in place for a worsened economic climate. Amongst SMEs with younger managers lack of planning is even more pronounced with only just over a third (35%) of managers aged 25-34 years old having a plan. Furthermore just 17% of SMEs revised their business plan only once a year, with a further 5% admitting to not having any kind of business plan in place at all.

The Plantronics research into SMEs also highlights that experience and maturity play a role in riding out a recession with respondents aged 55+ least concerned about the long term survival of their business. Interestingly, SMEs with a woman at the helm were also 30% more likely than their male counterparts to be weathering the storm so far, partly due to more aggressive and astute investing in key areas such as marketing.

Super SMEs

Despite the gloomy forecast for UK business, the research reveals a new and growing breed of company the ‘Super SME’ businesses still unaffected by the economic slowdown and confident about the future. The study found that these Super SMEs regardless of their sector are more likely to be continuing investment in IT infrastructure, staff training and marketing. Super SMEs were also three times more likely to have a plan in place for a worsened economic climate illustrating the power and relevance of a classic business philosophy – hoping for the best but planning for the worst

Whilst just 41% of SMEs believe their workforce is equipped to reach their full potential and reducing rather than increased training budgets over the past 12 months, Super SMEs were more likely to have increased investment with 39% actually spending more on training in the last 12 months than ever before.

Increased investment in IT Infrastructure is another area of commonality amongst Super SMEs. Almost half of all successful SMEs surveyed (47%) had kept up investment in IT, indicating investment in this area had a significant impact on their ability to stay afloat. Specifically, an area which is paying dividends is workforce mobility. 20% of SMEs who have invested directly in IT including mobile and hands free technology said that they were not worried about the current recession affecting their long term survival because of the IT infrastructure they had in place was helping to keep the workforce optimised for success. In fact businesses with a mobile-enabled workforce were found to be 60% more likely to forecast an increase in growth during the next 12 months – indicating the vital role flexible working practices and technologies play in successful business. In contrast 45% of SMEs do not believe they have equipped their workforce with the technology to reach their full potential.

Successful and continued investment in marketing is also a key characteristic of Super SMEs. Overall, SME investment in marketing fell in the past 12 months with nearly three quarters (68%) reducing or simply maintaining their marketing spends. Amongst Super SMEs however, 43% actually increased it, contributing to their success and long term prospects.

“During times of economic uncertainty SMEs tend to view investment in IT, staff training and marketing as luxuries instead of necessities,” Says Paul Clark, General Manager, Plantronics. “This research shows Super SMEs bucking convention and investing wisely in some or all of these areas are the most confident about the future and better placed to operate in the changing marketplace. Being a Super SME is within the grasp of most businesses, it’s never too late. With the right approach to forward planning, investment in the right technology, staff training and marketing, it is possible to survive tough times.”

Plantronics has produced a survival guide for SMEs with best practice advice from experts such as Peter Thomson of WiseWork discussing how flexible working practices are a ‘must-have’ not a nice to have. Karen Gill of Everywoman delving into gender issues within business and Jan Pinkerton of Business Link, East of England Development Agency explaining why making the right investment choices are key to any business’ survival. To download the Plantronics guide go to www.be-a-super-sme.com/advice.