SME Health Check – Practical advice for business owners

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26/06/2017

Running your own business is hard work, we know. You often end up doing many jobs at the same time as well as juggling the challenges and opportunities. It’s also important to understand how the economy could affect your business so we have created a quarterly report, the SME Health Check Index, which which is full of insights on the current economic circumstances facing UK SMEs.

We know that index scores are a little abstract when it comes to the day-to-day of running your own business. But there are insights to be gleaned from these numbers which map the current working environment for thousands of businesses like yours.

Rising business costs

The fact: Business costs are growing across the board. Overall business costs rose 3.3% year-on-year this quarter, up from 2.8% in the last quarter of 2016.

What it means for you: You need to keep a close eye on your business costs to make sure they’re not outgrowing your incomings and eating into your profit margin. If they are, your business won’t last very long.

Potential action:How do you keep an eye on your business costs? Use our break-even calculator to make sure you’re not spending more than you can afford. And look at our guide on how to increase your profit.

Employment levels are growing

The fact: In one of the most positive metrics, the Q1 index shows that employment levels are on the rise for SMEs. The index score for employment is up to 75, a rise of 13 points from last quarter.

What it means for you: With so many SMEs hiring, now may be a good time to evaluate your own staff situation. If competitors are growing their teams you might soon find yourself struggling to compete against those extra resources.

Potential action: Compare against your competitors where possible. If you are under-resourced, consider hiring short-term staff to help improve efficiency and productivity. By contrast, if you have considerably more staff, then you might need to consider down-sizing.

Hiring staff probably means growing your business. Take a look at our guide to creating a business growth plan. Also consider looking at how to budget for expansion.

Limited spending power

The fact: The report shows that inflation is outstripping wage growth and this is putting a squeeze on consumer spending power. People have less disposable income.

What it means for you: Of course this equals bad news for businesses. With consumers having less to spend, the market becomes more competitive and brand loyalty becomes more elusive as most customers opt for the cheaper options. If that’s not you, then you’ll need to adapt.

Potential action: To keep your sales figures stable in a changing market, you might want to consider reducing your prices to appeal to more customers and see off competitors. See our guide on how to find the perfect pricing strategy. You can also download our pricing and costing calculator.

Operating below capacity

The fact: A larger number of SMEs are operating below maximum capacity in the first quarter of 2017. The Capacity score is currently 49, down a huge 23 points from last quarter.

What it means for you: Working below capacity is not necessarily bad thing – it allows scope for increased demand. But it could signal need to increase your efforts to secure more business. If demand drops too low it could be dangerous for your cash flow and ultimately put your business at risk.

Potential action: Make sure your business will not be at risk if demand falls any lower. Look at our advice blogs on how to build cash reserves and make the most of existing assets. Keep an eye on your business as a whole by completing our business health check.

More resources

We have a range of information and resources designed to help you make the right decisions when running your business. From finance and marketing to export tips and sales techniques, our business experts will help guide you.

Check out our business resources and blogs for more.

This blog is not financial advice. The content of the blog is reliable at the time of publishing, but we can’t guarantee it is entirely free from error or omission beyond our knowledge. Links are provided for you to explore, but we have no connection with third party sites or responsibility for their content.