Recession spawns new breed of Business owner

First we had the Super SME now it’s the Super Entrepreneur.

Natural selection is not only confined to the theories of Darwin according to a new study which has unearthed a new breed of business owner, fit to survive the current recession and well into the future.

The research*, from leading independent invoice financier Bibby Financial Services, revealed that these super entrepreneurs are evolving because of the downturn, with 79% of small and medium-sized firms making, or planning to make, positive steps in order to survive and face economic uncertainty head on.

Cash is king when it comes to this new business breed with 69% of owners and managers claiming the recession has encouraged them to keep a closer eye on their finances. With seven in 10 firms experiencing a deterioration in their ability to access finance**, it’s easy to see why issues surrounding the management of late payment and improving cash flow top the priority list.

The figures also show flexibility is key to survival with 84% of owners and managers also making positive changes specifically in relation to their clients/customers and suppliers.  Of those businesses evolving, over half (56%) have been able to negotiate better terms with their suppliers, and the same number (56%) have managed to pursue new business opportunities. In addition, 39% have become more open and transparent when it comes to their business plans with clients and customers alike, resulting in a new flexible and more honest breed of business owner and manager.

However, as well as the positives, many businesses are having to resort to more drastic measures when it comes to surviving the downturn. 37% are cutting down on marketing their business or advertising & PR and 33% are even going as far as to use their personal savings to ensure the existence of their business. Furthermore 28% are, sadly, scaling back on production and 26% are having to bring services back in-house. 7% are downsizing premises or cutting office spend altogether and opting to run the business from home.

Ed Rimmer, chief executive UK and Ireland for Bibby Financial Services said:

“Regardless of size or industry sector, this research highlights the flexibility and diversification tactics that British businesses are being forced to learn in order to survive the downturn. With so many businesses taking positive steps to adapt to survive, it’s clear that stronger, more experienced entrepreneurs will emerge from these tough times. The message to those who are not taking proactive steps is that this is no time to be complacent – reviewing suppliers, finances, and in particular cash flow even now may prove vital to the survival of many of the UK’s small and medium-sized businesses.”

The profile of the new breed of business owner

According to the results of the study, the typical profile of this newly evolved super-entrepreneur is most likely to be:

  • Female
  • Aged between 45 and 54
  • Living in the South East
  • Have started their business between 1995 and 1999
  • Running a business with a turnover of between £250,000 and £500,000
  • Running a business that employs five or more people
  • Experienced in two previous downturns including this one

Indeed, it seems financial prudence divides the sexes when it comes to implementing change and potentially being fittest for survival in the future. 72% of women are more cautious about their finances compared to 67% of men, and one in three women says they have, or will develop, their understanding of financial management, whereas among their male counterparts this figure is just one in five.

Experience counts

The figures also show there is no substitute for experience – over half (54%) of business owners and managers have never experienced a prior recession or downturn. But it is business owners who have ridden out past downturns who are more likely to be scrutinising their finances more carefully, with 81% of business owners who’ve experienced a number of downturns since the early 1980s paying more attention to finances compared to just 64% of those who’ve experienced this recession only. However, 35% of those who started their business in the last three years know they need to develop their understanding of financial management.

Ed Rimmer added:

“There’s no doubt times are tough for small and medium sized businesses. Many will simply be fighting for survival rather than being able to take the time to look at what changes are necessary. However, even just taking a few minutes a day to look at the business in a fresh light and explore any potential new survival strategies could mean the difference between having a successful business in a year’s time or not.”

With the research showing finance is clearly the key concern for these struggling businesses, Bibby Financial Services is on hand to provide flexible cash flow funding solutions and is currently helping more than 3,000 businesses, handling client turnover of more than £3.9billion and advancing over £300million to help small and medium-sized firms realise their potential.

Unlike many other institutions and banks which are tightening their belts to cope with the current economic climate, as the largest independent invoice finance provider in the UK, Bibby Financial Services has recently secured a significantly enlarged funding facility and its doors are very much open for business.

 *Research was conducted on behalf of Bibby Financial Services by Continental Research among 301 owners or managers of small and medium sized businesses (i.e. businesses with a turnover between £50,000 and £1m) across the UK between 2 and 6 February 2009.

**Figures according to the CBI’s Access to Finance February survey published 4 March 2009

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