The British Business Bank received a boost this morning from a national study which confirmed that a business bank could help SMEs to succeed.
The launch of the study by accountants Kingston Smith, at Google Campus in East London, found that a flow of “patient” capital to high-growth SMEs is needed and would be welcomed by the SME community.
“We found that SMEs mostly borrow from family or friends or re-invest retained profits, but these sources are often inadequate for the growth needs of businesses,” explains study director, Professor David Gray.
“Our research shows that banks come a poor third in terms of finance sources – which is disappointing given that the UK is considered to be a market economy. SMEs need ‘patient’ capital, finance that is there for the longer term. This is the only way to stimulate and sustain high-growth businesses.”
Minister for business Michael Fallon was present to underpin the government’s dedication to increasing SME’s access to growth finance. He welcomed the report findings that explored what is needed for SMEs to succeed in this climate.
“SMEs are the lifeblood of the economy,” he announced. “The high figures of new businesses show that the economy is not stagnant and provide evidence that the economy is starting to change.
“Two thirds of these businesses are expected to survive, but what do we do about the other third? It falls to government to create a better environment for business. We are pushing further and faster to get rid of red tape.”
The findings also show that the majority of SMEs (58%) used just one source of finance to start their business, while 42% continued to rely on just one funding source to sustain their business.
Interestingly, the research reveals that successful SMEs regard greater customer satisfaction (89%) and greater customer retention (86%) as two of the top three factors when evaluating year-on-year success for their business. The other was increasing business profits (86%).
The report also identifies factors that help produce innovation and business success among SMEs. It credits the growing importance of entrepreneurial learning schemes, such as mentoring, plus social media for contributing to SME successes.
The study includes 20 case studies of SMEs.
Finicky Shirts Limited, online retailer of bespoke tailored shirts, is one of these companies. It has enjoyed annual growth of between 300% and 400%.
Remaining agile and listening to customers is one thing CEO David Buisson believes in:
“The focus on learning is important, as well as having a great product we have a great service and we learn from what our customers have to say and look at making changes.”
I asked Buisson how he believed the report could be used to change the business environment for the better:
“Government should allow the freedom and flexibility to enable entrepreneurs to be as successful as they possibly can be.
“That is down to their side of the ledger as well, but when they hit a brick wall or red tape, (they) don’t wait six months for something to happen because people will lose the idea and lose the initiative. We should have a free market economy so that people can run at their own speed – whatever is appropriate for them.”