In the UK, there are 5.7m small and medium-sized enterprise (SMEs), which account for more than 99% of private sector firms and 60% of total UK private sector employment. SMEs also account for 7.3% of all net private sector job creation in the UK, creating about two million jobs since 2010. It’s not an understatement to say that the health of the UK economy depends on the success of these businesses.
In this article, I’ll take a look at the big challenges SMEs will face in the upcoming 12 months, as well as solutions that will help address those issues.
A piece on the big challenges SMEs face within the upcoming year can’t really start with anything other than the General Data Protection Regulation (GDPR). This came into force at the end of May 2018 and the EU’s legislation now affects every single business with EU customers, no matter what size.
The requirements of the GDPR go significantly beyond those in the UK’s Data Protection Act 1998. It was designed to bring privacy regulation up to speed in the digital world. The possibility of a business finding itself already compliant without taking any additional measures is very unlikely.
Need help with meeting your GDPR obligations and making sure your businesses processes are working in the correct way? Here's what you need to know.
The challenge for your business over the coming 12 months is to ensure that any new privacy and data retention policies you have in place stand up to GDPR’s requirements, including the right to erasure (an individual’s right to ask for a business to get rid of all the data they have from them) and the requirement for all data to be obtained with full content.
The fines for non-compliance are substantial, which means your business doesn’t really have a choice but to do everything it can to comply. This will be time-consuming and potentially expensive but ultimately worth it if it means avoiding a maximum fine of €20m.
2. Staff retention, employment and talent acquisition
Staff retention is something that’s always on the minds of small business owners. As your business grows, you’ll want to keep your best employees while finding new staff to help you fulfil your goals.
To make sure this happens, you need to invest in workplace management and employee retention measures. This is something that has already been on the minds of SME leaders, According to recent stats, 66% of SMEs are said to have already upping their training budgets, 58% increasing salaries and 55% improving benefits packages.
The challenge for smaller businesses is not so much that the talent isn’t out there but that retaining employees and maintaining office spaces big enough for them can be expensive. In order to keep your workforce engaged and affordable, one area worth exploring is flexible working.
3. Technological change and innovation
As if a tough economic environment isn’t hard enough to navigate on its own, the relentless pace of change and innovation from large international companies is going to continue to force small businesses to adapt as well as they’re able to or be left behind. Let’s take a quick look at two areas that are likely to pose significant challenges in the next 12 months.
Ecommerce giant Amazon is continuing to push for faster delivery methods. Amazon Prime members in certain locations now enjoy same-day delivery, which is impossible for smaller businesses using Royal Mail and similar couriers to match. We also know Amazon is testing drone couriers and other ways to make fulfilment even faster that go far beyond the capabilities of regular logistics companies.
It may be nigh on impossible to compete like-for-like, which means smaller businesses will need to work even harder to promote reasons for custo mers to choose them over Amazon.
Automated customer service
Automated chatbots came on to the online business scene in a big way in 2017, and they look to become even more widespread in 2018. Chatbots don’t necessarily require a big drain on a business’s resources, but they do cost money and they will require development. Because of these barriers to implementation, small businesses may find themselves falling behind larger competitors in terms of customer engagement.
Is there a way to keep up other than getting a chatbot? Perhaps, but to do so will require more human time to be put into customer service, which could be even harder.
4. Making Tax Digital
The final challenge I want to mention is one that will only start to come into play at the tail end of this 12 month period. Nevertheless, it’s a challenge that every British business is going to have to come to terms with if they pay VAT.
Making Tax Digital
Making Tax Digital is HMRC’s move to digitise tax and the goal is to help you get it right – whether you’re a business, accountant or bookkeeper. Learn about what it means for you.
Making Tax Digital is an initiative being introduced by HMRC in April 2019. It will require all tax calculations to be made online, with no paper filing.
While the full roll-out won’t happen until 2020, HMRC will require all VAT to be paid via the new system starting from April next year. This also means relevant business transactions will need to be recorded digitally, a requirement meaning many businesses will have to buy new software and train staff to use it.
Making Tax Digital is a challenge that will affect some businesses more than others but the bottom line is all British companies will have to comply. However, there’s still plenty of time to adapt should you need to make changes, which means it shouldn’t cause too much of a headache for proactive businesses.
How can your business handle future big challenges better?
In light of these challenges, it’s important to look at the processes across the business and evaluate how each area will be affected. This comes in the form of reviewing strategy, HR and communication, as well as goals and budgets across the business.
To counter any potential HR and employee issues, employers need to make sure they not only effectively communicate to their team but also invest in employee retention measures. This is something that has already been on the minds of HR professionals across the industry.
Competing within your sector
The precise challenges that each business faces will be dictated by the sector they operate in. While GDPR and Making Tax Digital will affect every British business in some way, the impact will vary based on different businesses’ activities. The other challenges I mentioned will be even more varied.
If you haven’t done so recently, it’s a good idea to sit down with the senior managers in your business to discuss the challenges you’ll face in the next 12 months. Doing this will help any issues to be tackled company-wide, ensuring people are aware of issues and working together to ensure they don’t turn into real problems for the company.
Every year is challenging but with an effective strategy, assessments and plans in place, your business can be ready to mitigate and overcome any challenges that are thrown at it. These plans may seem like a nuisance but ultimately the planned direction that SMEs will be forced to take over the next year will only lead to making businesses in the UK more focused, strategic and effective.
Making Tax Digital: A guide for businesses
Not sure what Making Tax Digital is and how it will impact your business from April 2019? Download this free guide to find out what you need to do to prepare for it.