The tide appears to be turning for small and medium-sized businesses (SMEs). It’s been a challenging few years, with the pandemic, supply chain issues, rising costs and cautious consumers. But thankfully, the economic outlook is brighter and consumers are gradually loosening their purse strings.
As a result, businesses are showing growing confidence and optimism about the future. In fact, recent research conducted by HSBC UK revealed that 76% of businesses aspire to steady to significant growth over the next 12-24 months.
“We are seeing real evidence that SMEs are moving decisively beyond the economic shocks of the past few years,” says Martin Hanson, head of business banking at HSBC UK. “Amid high inflation and surging costs, many business owners naturally felt that keeping their business steady was an achievement in itself. Ultimately, however, most owners aspire to more – and we are now seeing renewed confidence about growth.”
Confidence is one thing though; strategy is another. So how are businesses planning to achieve the growth they believe is on the horizon? HSBC UK has identified three key focus areas: international growth, digitisation as an enabler of innovation and strategic workforce planning.
Taking the plunge on international growth
Polling of more than 500 decision makers at UK-based companies found that 85% of those with an international presence and a hope to expand further into new markets aspire to significant international growth in the next 12-24 months. Interestingly, there is a clear correlation between businesses that trade internationally and how comfortable they are with risk. In fact, nearly half of leaders in companies that trade internationally, and plan to expand further, say that risk-taking is the most important soft skill in a leader looking to grow a business.
Smaller firms have traditionally been less confident in considering exporting, but the accessibility of global markets increasingly makes business size less relevant
For many SMEs, significant international growth will also require the right mix of internal talent and external experts with a deep understanding of foreign markets, including supply chains, cultural differences and new regulatory requirements. In other words, SMEs don’t need to go it alone when it comes to expanding abroad. Indeed, those that do often face a more challenging path to growth.
Good data can also help SMEs to refine their international growth strategy and target resources effectively. Analysis that reveals growing interest from overseas buyers, for instance, could cut through decision paralysis and encourage SMEs to take the kind of calculated risks needed to accelerate growth. Indeed, the smallest two groups of organisations surveyed by HSBC UK said the biggest barrier to decision-making was ‘not enough risk-taking’.
SMEs may also be overestimating the scale of the risk and complexity involved in international expansion – and missing out on growth as a result. “Smaller firms have traditionally been less confident in considering exporting, but the accessibility of global markets increasingly makes business size less relevant,” says Hanson. “Also, the size and appetite of overseas consumers – especially in high-growth markets – is something business owners can’t afford to ignore if they have their sights set on expansion.”
Digitisation as an enabler of innovation
In total, 81% of respondents to the HSBC UK survey believe there is a strong or very strong link between innovation and growth. Respondents with the biggest growth ambitions also emphasised the importance of making the most of technologies such as AI and machine learning, which are rapidly becoming mainstream tools in many industries.
These technologies can enhance an SME’s ability to innovate at speed and bring new products and services to market faster. In fact, a strong technology foundation is often essential for unlocking the innovation and productivity improvements needed to achieve strong growth today.
“It’s not surprising that there’s a correlation between businesses with growth ambitions and those focused on getting the most from tech innovations,” says Hanson, although he adds that: “Tech is not a cure-all, but an enabler for strategic growth.”
To get the most from their investments, SMEs must identify tools that can deliver real business benefits and avoid getting caught up in the hype around new technologies. As with international growth, the right external partners can help them cut through the noise and successfully hone their digital strategy. And while there may be some near-term costs involved in digitisation, the long-term benefits are often transformational.
Strategic workforce planning
Although 37% of respondents to the HSBC survey believe a lack of access to the right tech can inhibit innovation, the most pressing challenge facing business leaders today is often a lack of the right people, with 38% of leaders citing this as a top three barrier to innovation.
Indeed, workforces that are properly future-proofed are a vital component of successful growth strategies: if you don’t have the right people, with the right abilities to take advantage of new technologies, it can quickly undermine any attempt to drive innovation and grow the business.
Many respondents to the survey also emphasised the importance of a good work-life balance and a happy workforce, suggesting that ambitious plans for introducing new technologies or expanding internationally should not come at the expense of employee wellbeing.
“Far-sighted leaders are looking ahead to match the shape of their workforce to the future needs of their businesses,” says Hanson. “That means investing in the right skills while making your business a desirable place to work.” He adds that: “The culture and dynamism of smaller businesses often gives them an advantage here.”
This dynamism is coming to the fore again now that the pressures of the past few years are beginning to ease. SMEs that successfully apply it to their international growth, digitisation and strategic workforce planning strategies should be well-placed to achieve strong growth – yet another cause for more optimism in future.
