Five Years On: Helping business owners to grow and succeed in challenging conditions
Kevin Petley reflects on five years with elephants child, and the many challenges business owners have had to tackle during that time. He’s worked with over 50 businesses during those five years on Business Growth Plans and providing board advisory support.
Reaching my five-year anniversary as a Business Advisor with Elephants Child felt like the right moment to reflect on what challenges and changes have occurred over this period across the UK SME market that we support.
A Tough Backdrop for SMEs
SME owners are no strangers to challenges around people, sales and marketing. But over the past five years, those pressures have been compounded at a macro level by:
- A more uncertain political and economic world
- Ongoing fallout from Brexit
- The long tail of Covid
- Sharp rises in employment costs
- Increased tax and compliance complexity
Individually, each of these would be demanding. Collectively, they’ve reshaped how SMEs need to operate.
A more uncertain political and economic world
The current geopolitical situation and the resulting unpredictability around the globe has worsened over the past 5 years, and is by default creating uncertainty, resulting in reduced confidence, reduced investment and overall increased costs directly and indirectly across UK SME businesses. For many SME’s, the clear impact here has been among things such as the cost of raw materials and in terms of their energy costs. Whilst this has made things much tougher, we still have yet to understand the real cost of the impact from the proposed US tariffs.
Fallout from Brexit
Brexit fallout has been ongoing and primarily operational particularly for SMEs. Notably in respect to increased import and export paperwork, VAT complexity for cross border trade, along with additional rules around origin, affecting pricing and margins. Plus, the loss of easy access EU labour. This has resulted in many businesses having to increase their costs or downsize.
Surviving post-Covid
In respect to the Pandemic, many SMEs are still servicing pandemic-era debt, banks are more cautious about lending to SMEs with legacy debt, and structural changes during the pandemic are still causing issues today. That said, some businesses did as a result, start or accelerate their online position, with many who embraced e-commerce doing significantly better. On the people side the introduction or development of more flexible working, WFH, has brought about a soft revolution, allowing businesses to take a more economical approach to office location and size, with its obvious efficiency paybacks, although managing remote working still remains a challenge for many.
Employment Costs
In some respects, the overall increase in employment costs has crept up on many businesses, but the reality is they’ve had a significant impact overall on SMEs. A combination of increases to the National Living Wage (above inflation), Employer National Insurance changes and thresholds, auto-enrolment pension costs now fully embedded, along with availability and stronger competition for labour posts, due in large part to Brexit. SMEs have responded with a reduction in hiring, increased use of part time and zero hours staff, more automation, i.e. acceleration of AI, along with role consolidation.
Tax compliance and complexity
The regulatory burden on SMEs has increased noticeably. Making Tax Digital, IR35 reforms, heightened HMRC scrutiny, and digital enforcement have all raised expectations around record-keeping, reporting and forecasting.
While compliance can feel onerous, better-quality data and forecasting, when used properly, are actually powerful tools. At Elephants Child, we know that well-run, well-informed businesses make better decisions and build more value.
The positives
While they haven’t been easy to manage, the changes over the past 5 years have some real positives.
Many SME owners have been forced to step back and look at their businesses in more detail, scrutinising how does the business really work, where do risks sit, and where is value created? We’ve seen more owners actively reduce dependency on single customers or suppliers, strengthen planning, and build resilience into their models.
Crucially, business owners are also reaching out for help, because they recognise that external support can help them to grow faster, increase value, and provide them with more and better options, particularly around how they eventually exit their business with maximum profits.
The truth is that over the past 5 years, SMEs have absorbed major policy shocks, faced rising employment and compliance costs, operated in a more regulated, data driven environment, whilst at the same time, and with help, have become leaner, more data driven and more professional.
What Will the Next Five Years Hold for SMEs?
If the last five years have taught us anything, it’s that uncertainty is no longer the exception, it’s the usual operating environment.
The opportunity for SME owners now is not just to survive, but to build businesses that are resilient, adaptable and valuable, whatever comes next.
Are you and your business ready for the next five years?
If I can help or support please get in touch for a free, confidential chat about how I can help.