Mark Lee explores the findings of a report into the key triggers for success among small businesses in the UK, which he says contains lessons for accountants and their practices and clients.
The report was published last month and identifies the triggers for success among small and medium-sized businesses.
The research was conducted by Professor Mark Saunders and Professor David Gray of the University of Surrey. It is based on the views of over 1,000 business leaders in the UK and delves into the key triggers for success.
The report’s key findings cover a wide range of areas including finance, social media, networking, access to advice and leadership.
Success
The first key finding in the report is: What success means to small businesses. It starts by reflecting on what small businesses think of as success. I addressed this from a very different perspective in a recent AccountingWEB article Make your new firm a success.
According to the report: “Although it was good to have dreams about the business, the key to success for businesses was financial success, including maintaining cash flow”.
No surprise there of course, or in the idea that: “Success was based on repeatability of business to achieve recurring revenues and, for some, growth, maintaining cash flow and creating shareholder value.”
The report notes however that for some small business owners, success may be based upon non-financial measures such as a sense of fulfillment or challenge, or building a lifestyle business and work-life balance. Enhanced reputation and being seen as making a contribution to society were among the more altruistic goals.
Finance
I doubt many accountants will be surprised to learn that the attitude of small businesses toward banks “ranges from disappointment to contempt”. As is well known, banks seem to know very little about what small businesses need.
Almost three-quarters of start-up businesses rely on personal or family savings. Less than a third rely on bank loans for finance either at start-up or later in life. A range of alternative options are more popular, even if only because they are more accessible.
Cashflow
The importance of monitoring cashflow is well known to accountants. There is a clear need to ensure that small business clients understand the key elements here and are able to monitor their business cashflow.
They need to be able to contract when market conditions require it. The same applies to accountancy practices of course, but does the market ever demand this in the accounting world?
Success factors
Once we move beyond sales, cashflow and liquidity the other factors identified by small and medium-sized businesses as being important include:
Planning the future of the business by:
- identifying growth opportunities
- early identification of negative market conditions
- managing interpersonal skills
- having a website
- developing management skills
- marketing
Most of the above were also felt to be extremely effective contributions to the success of small businesses but there was no direct correlation with those felt to be important.
I wonder how many of these factors apply equally to accountants’ own businesses?
It is also worth noting that small businesses' perceptions to the effectiveness of using networks and social media lagged some way behind the other factors listed above. This supports my view that they are 'nice to haves' and should not consume a disproportionate amount of time and effort.
Networking and social media
The most important aspect of these necessary evils is felt to be the facility to generate direct referrals.
Search Engine Optimisation (SEO) comes second but no other benefits are echoed by more than 40% of the small businesses who took part in the survey.
On the issue of direct referrals and reading between the lines of the report I surmise that these often come from face-to-face networking.
While it is possible to generate new connections and leads through social media, the real value and relationships generally only follow after you meet up face-to-face. This is another point I routinely stress to those who are experimenting with different forms of social media.
The report does however contain a great case study about ‘Bike Dock Solutions Limited’ who have made more effective use of social media than most accountants will ever be able to do.
Entrepreneurial orientation
Entrepreneurial orientation is defined in the report as “the process, practice, and decision-making that leads to new entrants to the market.”
In this context the entrepreneurs running small businesses typically demonstrate high levels of commitment, proactiveness and “persistence in adversity”.
They learn from experience and often consider themselves as unemployable. I suspect this resonates with many accountants who have been running their own practices.
One of the most welcome observations here I think is the willingness of small businesses to try new ways of doing things and to seek unusual, novel solutions. Is this also true of small businesses' accountancy practices I wonder?
Learning orientation
I was initially surprised to note that small businesses value learning and that the majority are committed to personal development in one way or another.
In contrast accountants are only renowned for committing time to keeping up-to-date with technical developments. Attendance levels at personal or business development training courses or accountants is always much lower than for technical topics.
It seems that the personal development of small business owners is often derived from informal opportunities.
However, many do seem to be willing to work with a mentor, coach or to attend peer-led discussion groups. I wonder if there are opportunities for accountants to facilitate such learning opportunities for their clients?
Advice and support
Beyond finance and cashflow the next most common area where small businesses take external advice is wesbite design and SEO.
The latter seems to be the cause of some frustration however due to conflicting advice from SEO consultants. I shared some ideas here recently by reference to an interview with Nick Rink.
Concluding remarks
This report contains few surprises but much that should be of interest to accountants who have SME clients and who are themselves SMEs. As I frequently point out, the definition of SME is so wide that it encompasses all but the very largest of firms, so that’s you then!
The Surrey Business School at the University of Surrey was commissioned by Kingston Smith LLP, a top 20 chartered accountancy firm, to conduct a research study into the ‘triggers for SME success’.
Mark Lee is consultant practice editor of AccountingWEB and writes the BookMarkLee blog for accountants who want to overcome the stereotype of the boring accountant. He is also chairman of the Tax Advice Network of independent tax experts.