We have just passed the midway point of the 2024 (at time of writing), and there are clear trends appearing in the small business world.
Let’s run through these top three SME trends, and explore how you might go about staying ahead of them!
1. Late Payments are still a problem
If you give your customers or clients time to pay your invoices, you might have noticed some of them are being paid late. This is a trend we’ve seen repeat itself over the years in times of economic challenges – and it’s not going away.
At time of writing, the average small business takes around 29 days to be paid. This may not seem too bad, but the stats show that during 2023, late payments cost UK small business an estimated £1.6 billion.
Whilst there are many reasons for late payments, it is an ever-worsening trend in 2024, particularly in the freelancer market. We are seeing bigger businesses holding on to payments, and constantly extending the number of days a small business / freelancer waits to get paid.
(More on the impact of late payments in the excellent blog by accounting software company Xero.)
- What you can do about it
As a small business, there are five key things you can do to impact when you get paid:
- Invoice promptly, and regularly
- Invoice cleanly
- Remind regularly
- Make it easy to get paid
- Review who you give credit to, and for how long
For more details, see our blog 5 Tips on how to get paid quickly in your business.
With big businesses customers, you may be restricted on how much you can influence payment timings. However, applying some of the basic tactics in the blog will at least remove any obvious barriers.
A 2019 study showed that businesses that adopt payment solutions technology get paid up to 21 days faster. So it’s well worth investigating if you are struggling to be paid and don’t have the technology in place.
For example, payment services providers like GoCardless, Stripe and many others, used in combination with accounting platforms such as Xero and QuickBooks can streamline how you get paid.
2. Customers are being more ‘picky’
From conversations with our clients, it’s clear that they are seeing their customers being more ‘picky’ (aka value sensitive) about where they commit their money.
As a result, small businesses are seeing:
- Contracts and tenders being issued slower
- Tenders and contracts being even more targeted towards the lowest price option, rather than the best overall package
- Restricted ‘scope’ of their services (customers cutting back on elements previously bought)
- Sweeping or complete cuts to their services or product altogether
- Customers switching to low cost, lower value alternatives
With this in mind many clients have seen sales growth slow, a figure supported by Xero’s Small Business Insights report of March 2024. This in turn is leading to increased challenges with customer retention.
– What you can do about it.
Our clients report successes with some or all of the following tactics:
-
- Repricing and restructuring products and services for a better value proposition
- Reassessing current services and increasing focus on designing products and services that the market wants. (Talking to their customers or clients about this has yielded big insights.)
- Increased client engagement to remind of value
- Continued marketing strategy to attract ideal customers who value their proposition, to replace those turning away from the service or product
Do let us know what works for you in 2024!
3. Costs are rising, and profits are struggling
Another key trend is that net profit (and gross profit) are trending downwards for many businesses. Basically, that means they are making less money!
The consistent rise in the costs of everything from software to raw materials is causing increased pressure on small businesses. Whilst the latest figures show that the rate of inflation has held firm at 2%, other key indicators are still high, including the Core CPIH are up 4.2%.
Many small businesses do not react quickly to these issues with their pricing, so the impact on their profits and cash is often delayed. So, we are seeing an ever-increasing number of businesses now struggling as a result. Sadly, this is resulting in a high number of insolvencies where the businesses have finally collapsed under the pressure.
– What you can do about it
Check out these articles for actions you can take including:
-
- Consider and review your own pricing
- Consider and review your business ‘model’ – does it still work? (did it ever!?)
- Review your own costs for savings, but don’t panic
4. There is still money out there, but where is it being spent?
Okay, it’s not a trend at such, but despite all these challenges, we are seeing a good number of successful businesses who are excelling in these conditions.
The data shows certain sectors (recently arts & recreation for example – thanks Ms Swift!) showing good sales growth.
There certainly are businesses doing well, but don’t get disheartened if you are not at present. Concentrate on what you can control, focus on the numbers and operations, and we are sure you will thrive!
Help is at hand
If you don’t have an accountant, or feel you need some general advice on your business finances, we can help. For more details and ways to discuss your particular situation:
Or come along to one of our breakfast networking meetings with other local business owners. There’s nothing like a chat over coffee to realise that others have faced the same challenges and found ways to move forward. They may even share with you their top tips too!