With rampant inflation and a cost-of-living crisis in progress, it would be easy to assume that businesses would be consolidating and cutting costs. While some may be, though, the attitude where SMEs are concerned looks surprisingly optimistic.
There are challenges, however. So, should you go for growth or concentrate on playing safe?
SMEs Planning for Investment
A recent survey by retail bank Aldermore has revealed an unexpected trend among SMEs. 33% have plans in place to expand their customer base, while almost as many intend to expand their current product and service offers. In all, Aldermore have calculated that SMEs are planning, on average, to spend £321,000 each, with 12% targeting over a million.
Over the past year, emphasis seems to have moved from spending on talent to investing in digital assets. One in four plan to spend on improving their website and apps, while others are intending to invest in digital marketing.
How Is Growth to Be Paid For?
At the same time, there’s also a widespread intention to cut costs in the present crisis, so where is the investment coming from? Many of the SMEs involved have reserves to dip into, whereas others are intending to access various business finance packages, such as asset finance.
However, a significant number of business owners are proposing to finance this growth personally. In some cases, this would involve dipping into their savings, while others expressed willingness to max out their personal overdrafts.
In the right circumstances, these approaches can work effectively, but you need to be very sure about your prospects. While you might not bet your home or your car on this growth working, losing your personal savings, or being faced with a hefty bill for repaying your overdraft could have a significant negative effect on your private life.
Are You Planning on Growth?
Although it may seem counter-intuitive, a difficult economic climate can be a good time for an SME to target growth and a chance to pick up a larger share of the market. It has to be done carefully, though, with a realistic chance of success.
Whether or not you’re applying for a business finance product, it’s as well to prepare your data as if you needed to convince the lender that your plan is a good risk. This is where a good accountant can help, who can give you realistic advice, rather than just rubber-stamping your decisions.
Before you start looking for extra money, though, you need to look carefully at whether you’re making the most of your existing cashflow. How much potential funding is currently tied up in unpaid invoices? How much difference could that money make to your growth plans?
Give me a call to see how I can help get money due to you into your bank account.