Business Owners Over the Age of 45 are Finding this Financial Crisis Harder to Bear than Any Other
Uncertainty in the strength of the UK economy will result in British business spending £81billion* this year on short term stop gaps such as temporary staff or hired in equipment, says a report published today.
These findings come hot on the heels of figures published by the Office for National Statistics last week, which indicated that the British economy had narrowly avoided a triple dip recession, with growth coming in at a slim 0.3% for the first quarter of 2013.
The “Volkswagen Caddy – However Big Your Ambition Report” reveals that three quarters (72%) of business leaders now feel less optimistic about 2013 then they did in 2012, whilst only 5% of small and medium sized (SME) business owners feel more confident now about their company’s prospects than at any point since the banking crisis took hold in 2007.
Nine in ten (93%) businesses say that they already don’t expect to achieve their annual financial targets in 2013. And just one in five (19%) of the 1,000 SME owners interviewed for the report say that their business is ‘busy’.
But what is more, is4profit.com can exclusively reveal that SME business owners over the age of 45 are feeling the most concern over the effects of the banking crisis.
Whilst one in five 18-44 year old business owners are currently prepared to stretch themselves in these trying economic circumstances, nine in ten business owners over the age of 45 are taking a ‘day by day’ approach to business, with only 9% willing to put together any long-term plans.
The constant worry about the performance of their company means nearly half (43%) of the over 45s say they would rather spend more money on temporary personnel than commit to taking on more staff on a permanent basis.
This compares to just a third (36%) of younger business owners.
But in spite of feeling less cautious about the future on paper, the report writers calculate that UK businesses with owners under 45 will actually spend nearly £45billion more than their older peers this year on short term fixes such as temporary staff and hired in equipment.
Young business owners’ bills for short term solutions are estimated to come in at a whopping £63billion, compared to the £18billion which will be spent by the over 45s.
When split down, this equates to an average of £8,244 spent annually by each SME in the UK on casual staffing and £8,918 on hired-in equipment.
With temporary staff alone costing an average of 40% more than permanent personnel, this means that SMEs in the UK are collectively spending £15.8billion more than necessary each year.
A spokesperson for Volkswagen Commercial Vehicles says:
“This desire to minimize outlay amongst SMEs over 45 years old has been a surprise to us, as we would have expected behaviour to be the opposite of what our data has revealed.
“This will not be the first recession the older business owners have had to endure and many will be aware of the successes that businesses have gone on to achieve by investing during a downturn.
“Ultimately, taking a short term approach to business can be short-sighted, and considering the whole-life cost of machinery and items like a vehicle fleet is important when avoiding false economies.”
The Volkswagen Caddy report also highlights how younger SMEs are suffering more when it comes to their clients trying to negotiate prices downwards.
Half (48%) of all SMEs with owners under the age of 45 have experienced their clients asking for money off their bill since the start of the recession.
This compares to a third (38%) of businesses with older owners at the helm.
The Volkswagen Caddy findings also show that the desire to retain customers in 2013 means that a third (33%) of all companies have agreed to take on work for a lower price than they charged for the same job last year.
Such is the fragile nature of many young business owners’ relationships with their clients that the report writers calculate that, each year, these companies are missing out on charging customers over £46 billion in late payment charges; 23% more than their older business counterparts who are missing out on a collective £10.5billion.
When it comes to business mistakes, however, hiring someone who wasn’t right for the job was revealed by the report as the most common mistake by business owners across the board, showing that this is one area where age and experience doesn’t make a difference.
Almost a third of the business owners quizzed said that they had given a job to someone who soon turned out to be a mistake and not right for the role.
Other common mistakes made by businesses included pricing errors, offering too many discounts and taking on a friend or relative to work in the business.
The study revealed that mistakes and wrong decisions cost UK businesses an average £2,340 every year. Common mistakes included allowing a junior member of staff to have more responsibility than they were ready for, acting on bad advice and losing a good member of staff because they were refused a pay rise.
Top business mistakes
- Hiring someone who wasn’t right for the job
- Making a pricing error
- Not taking advantage of an opportunity
- Giving too much discount on something
- Taking a friend on to work for you
- Taking a relative on to work for you
- Firing someone
- Trusting someone/a business partner that didn’t work out
- Investing in equipment which didn’t work
- Ignoring good advice
- Allowing a junior more responsibility than they could handle
- Acting on bad advice
- Declining a pay rise which meant a good member of staff left
- Giving someone a pay rise and regretting it
- Investing in another business which didn’t work