It could be argued that the typical small business is founded by someone who is passionate about what they do and working for themselves rather than passionate about building a new Amazon or Apple. They are not motivated to strive for growth, profits or corporate power. They just want to own the business that employs them comfortably. Well OK, 10% are motivated, which is about 550,000 in the UK right now. But how to support them? And if we could where is the budget? And what about the other 5m SMEs that are not driven to increase productivity? How can they be helped to run more ambitious businesses?
Small business owners tend to have high operational skills, the core of what they do, but poor marketing, finance, systems and people management skills, because they had no previous experience in these disciplines. Offering help and advice in these areas is essential if we want UK productivity to rise in the face of Brexit.
What help is out there?
Practically speaking there is no government support. The current poorly funded LEPs and Growth Hubs, which are the husks of what they replaced, have such small budgets as to be ineffective. So small businesses are no longer being contacted, assessed and supported in any meaningful way.
There are numerous freelancers and their networks of consultants, trainers, mentors, coaches all striving to help, but at the national average rate of £500 per day, 90% of small businesses can’t afford them, or more like, afford for them to do a proper job, by sustaining the inputs until consistent improvements are apparent.
The banks are nibbling at it with free basic software and networking meetings and the numerous online accounting software vendors are marketing hard to get small businesses signed up. It all helps, but not much.
So, nationally we are stuck, with an inability to find and help small businesses, most of whom don’t realise they can be helped to grow and couldn’t afford it if they did.
The Government’s assessment
Released in the last quarter of 2018 the House of Commons Business, Energy and Industrial Strategy Committee published its Fifteenth Report of Session 2017–19 on Small Businesses and Productivity identifying this lack of productivity in small businesses. Interestingly they also focused on weak digital skills as a key cause of this failure.
Learn from the (recent) past
In 1988 I started a business consultancy that led the government of the day’s investment in small business performance improvement to raise the UK’s sad ranking of 21st in terms of international competitiveness. The budget was big and the ambition bold. The Training Agency was privatised into the Training & Enterprise Council network (TECs) and a network of privately-run Business Links was established.
These well-funded bodies paid me to develop programmes to improve small business performance and teach consultants and trainers to take them out to 1m small businesses.
The basic formula is simple:
- Analyse the current position, benchmark that against industry norms and measure the gaps to see what is possible and how much is being lost in sales, profits and productive capacity.
- Forecast the potential, get the business owner to choose the goals and make a plan to achieve them with a budget, monthly management accounts and KPI reports.
- Work with the business to implement the plan until the results show through consistently in the monthly reports
- Teach the business to be self-reliant
- Exit
The constant thread had been to get businesses to embrace systems to inform them where they were; define where they could be; and measure progress. By the time these government-funded networks were dismantled in 2010-2012 the UK’s ranking in terms of international competitiveness had risen to 7th place.
How can we best help small businesses today?
The answer to this question has to be with technology, specifically AI (Artificial Intelligence) applied by business advisors, banks and accountants who are invested in the success of their client businesses and have the influence and credibility to offer guidance that, using AI, would be so affordable they could provide it for free or at very low cost.
In fact the Government’s own 2017–19 report on Small Businesses and Productivity rightly identifies technology as the solution. The proven productivity guidance systems and processes may remain the same as in 2010-12 but now pervasive technologies offer easy connectivity, huge time and cost savings to the advisor, the small business and to its customers.
If advisors, banks and accountants subjected their business clients to regular reviews of AI benchmarked performance across the whole business (ie marketing, operations, systems, people, finance) the steady drip of seeing unfavourable comparisons would start to motivate, dare I say, the ‘traditionally unambitious’ small business owners to think of how to improve. It could simply be part of the regular client review process to run a 10-minute session and then publish the comparisons in an easy to understand format and ask the business what they would like to do to close the gaps.
The UK Government might have dropped the ball but banks could use AI to influence charges and lending rates and accountants could certify in annual accounts that the business was a high grade ‘going concern’ which would influence credit scores and that is the seminal moment when productivity will start to improve.
So, if it’s that easy why aren’t banks and accountants doing it already?
Good question. Maybe they would if someone had invented software that could do it and Government, British Bankers Association and Accounting Institutes supported it.
Duncan Collins is Founder of Runagood.com Ltd, an online ‘whole business’ consultancy that has developed AI to accelerate the same processes that raised UK small business international competitiveness from 21st to 7th place. Thus, accountants, banks and consultants can use the technology to rapidly analyse and benchmark whole business performance, generate a performance improvement plan and implement practical actions through online coaching at fractional cost. His vision is that ‘the world’s smallest business can afford and prosper through sustained performance improvement advice’.