With the economy on the upturn and a surge in funding options, the number of small and medium-sized businesses (SMEs) in the UK is increasing at a welcome rate.
In fact, according to the Department for Business Innovation and Skills, there were an estimated 4.9 million businesses in the UK at the start of 2013. There are now 21 million worldwide, and there is no doubt that SMEs are and will always be the backbone of every economy in Europe, as they consistently generate substantial income, employment, outputs, innovation and new technologies. But with so many SMEs operating within the UK, what can an SME do to stand out from the crowd?
We recently conducted a five year benchmarking study on European SMEs across the UK, Germany, Holland, France, Spain, Ireland, Sweden and Portugal. Our report documented how ‘standing out’ is important, especially for newer SMEs that need to grow in order to be successful, not least because growth stagnation can prevent SMEs from realising their full potential.
From the results of the study, we identified six key success factors that can help SMEs them stand out in saturated market conditions and differentiate themselves from their competitors. From these factors, SMEs will be able to identify the key priorities for their business, and then put a strategic action plan in place:
1. Maintain a sharp focus on the market
An SME should never get too comfortable with its position in the market. Markets are ever-changing and SMEs that fail to adapt to these changes could be left behind as the market develops. It’s important for an SME to always give consideration to where it’s positioned and how appropriate its position is.
2. Bring more to the party
SMEs have to bring something new to table. If an SME isn’t providing an offering that sets them apart from its competitors, there will be no incentive for potential customers to do business with them or for customers to repeat business. Utilising the latest technology, knowing something competitors don’t and offering something new to the market are all effective unique selling points that will help SMEs shine above their competitors.
3. Build resilience and operate with financial discipline
An SME could be largely profitable and successful, but poor financial management will be the downfall of any business regardless of its success. Standout SMEs generally have a prudent attitude to borrowing and have higher retained earnings than other firms. Adopting these traits helps to ensure a more financially stable future that’s free of overbearing debt, and with more earnings going back into the business through higher retained earnings it creates a safety buffer for unexpected outgoings and funding for future growth.
More on running an SME:
- UK SMEs need to focus on diversifying customer bases
- Unlocking workforce potential key to SME success
- Thinking about the options for finance as an SME
4. Right size your organisation
Critical mass is vitally important as it can be the deciding factor in survival for any SME. Failing to reach critical mass may hold back sustained growth and efficiency. Right-sizing is the best approach to prevent this; it’s an important aspect of SME survival and should be a constant part of the process at all stages of development. SMEs should re-evaluate their business structure with their current market in mind, focusing on market developments and new technology whilst considering the future of the company and where they should be headed. A new strategic direction will allow an SME to identify any new skills which may be needed in the future so they can hire or train employees accordingly, setting themselves apart from competitors as the market develops.
5. Increase your international outlook and extend your geographic footprint
It’s easy for SMEs to become comfortable with the simplicity of operating within their original market they were introduced into, but extending business beyond local or regional markets goes hand-in-hand with growth. SME’s that become complacent will miss out on opportunities to bring in more customers from a new geographic area, and may stunt their own growth. The German SME market, or Mittelstand, is larger and more innovative than other markets, due in-part to bigger and more regular exporters that account for a larger share of revenues.
6. Manage for today and lead for tomorrow
Although it may seem obvious, the most important determinant of the success or failure of SMEs comes down to the quality of their management team. Managerial roles will always differ depending on the industry, but the right kind of manager in any SME will have its best interests at the forefront of their considerations. Managers who can effectively aid right-sizing and have a vision for the future will help an SME to differentiate themselves further from competitors with new innovation.
SMEs that develop a full understanding of how these six interlinking factors impact their business will have a much stronger chance at surviving and prospering, and really become a stand out SME.