Finance · 16 November 2015

A third of micro firms haven’t grown in the past five years, blaming too much red tape

Micro businesses feel red tape and lack of capital is restricting their growth
Micro businesses feel red tape and lack of capital is restricting their growth

A third of micro businesses have stalled in growth over the past five years, as lack of capital, too much red tape and lack of support from banks held them back.

According to research from the AAT (Association of Accounting Technicians), 33 per cent of the thousand micro firms surveyed said they hadn’t seen growth in revenue, while 31 per cent hadn’t experienced an increase in profits since 2010.

When asked what they thought would help turnaround their fortunes and enable them to grow in the future, 31 per cent of businesses mentioned effective marketing, PR or a stronger web presence.

Business Advice’s sales and marketing expert, Becky Campbell, has provided a useful guide on how small firms can start getting their name out there as well as how to go about creating great content and what to do with it once you’ve done so.

Of the micro firm respondents, 19 per cent cited expansion into new markets as the key to future growth and 16 per cent wanted more support from the government – whether in the form of funding, tax breaks or training opportunities. A further nine per cent mentioned a more simplified tax process as something which would help their growth ambitions.

The big factors micro firm owners mentioned as hindering their progress, were a lack of capital to expand, too much red tape and ongoing lack of support from banks.

Despite the current barriers, forecasts were optimistic, with 76 per cent of small firms expecting an increase in revenue and 78 per cent predicting profits to rise over the next five years. Some 58 per cent admitted they didn’t have a business plan to facilitate growth, with ten per cent wanting to compile one, but unsure how to put a plan together.

Mark Farrar, chief executive of AAT, said: “Growing your company can be one of the hardest stages in the life of a business, but with the right skills it can be done. Growth can put pressure on cash flow which is why many businesses fail when they’re expanding.”

He added that having the necessary financial skills as well as a clearly defined business plan “are essential tools to help firms expand successfully”.

The sectors which had stagnated the most, included IT and telecoms where 43 per cent of firms reported no growth, arts with 39 per cent saying they had plateaued, construction with 34 per cent, professional services with 33 per cent of businesses reporting no growth and retail at 30 per cent.

Farrar said: “Whilst a strong sense of direction is important, its also necessary to develop contingency plans should market conditions or the competitive landscape change.”

Image: Shutterstock

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Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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