SMEs adopt flexible approaches to overcome viability issues

Nearly three quarters of small businesses in the UK report taking some form of flexible approach in
order to overcome potential pitfalls, new research has found.

The study from Direct Line for Business reveals that 74% of firms have taken steps to ensure they
can scale up or down without impacting on the viability of the business.

As a result, the companies can tackle changing market pressures or fluctuating demand, reducing
the likelihood of funding being spent when it is not needed.

It is suggested that around three million businesses in the UK are operating in this way, as half of
SMEs say their headcount fluctuates wildly across the year.

Short‐term approaches to property in the form of pop‐up stores and short leases are also
increasingly popular.

Peaks and troughs in revenue were also showcased by numerous firms, highlighting the need for
good cash flow management throughout the year.

Flexibility frees up funds for businesses as it reduces unnecessary expenditure, especially if a
company is fronting up to financial issues.

Being able to scale down at a point of pressure means risks to the long‐term survival of a business
are reduced.

Such an approach also provides more time to overcome more serious financial problems, to
restructure or to refinance.

Options reviews can help to assess the current situation facing a business or to advise on the best
way forward, while an independent business review may also aid the creation of a strategy that
supports a more financially secure future.

The key for any business facing financial turmoil is to act quickly, as this usually increases the
number of potential rescue and recovery options that are available.

The report also highlighted the need for flexible finance options, as regular repayments can place
pressures on cash flow, especially at times when inflows are low.

A range of alternative finance options can overcome these funding issues, although what works for
one business will not necessarily work for the next.

By Phil Smith




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