Guiding busy small business owners

The answers actually surprised us. We work closely with key referrers such as brokers, accountants, bankers and lawyers, who point their clients to us to help them improve their cash flow in a variety of different situations.

We see the very close relationships between these referrers and their clients, and we expected to see this reflected in our index results.

However, the index showed that SME owners seem unwilling to seek outside advice, with 38.6 per cent declaring that they had no trusted business adviser.

This was a far larger percentage than those who did name trusted business advisers: the top three sources were trading partners (26.6 per cent), friends (9.7 per cent) and accountants (9 per cent). Only 4.2 per cent nominated their bank manager.

The fact they were more likely to turn to a friend to provide advice about their business than well qualified professionals indicates a real opportunity for finance brokers to step in and fill this gap for SMEs.

As someone who started his own business, I can relate to how lonely and challenging it is to be the person who is expected to have all the answers. With this as a background, advisers must act more like friends rather than like someone being paid for advice.

I believe it’s all about gaining the trust of the small business owner. It starts with striking up a rapport, understanding why they are in business and what drives them.

Once the trust is there, relationships develop quickly. Asking pertinent questions will identify issues that business owners are wrestling with, allowing informed and relevant advice to be given.

To be a trusted adviser to small business owners, you must be genuine in wanting to help them succeed and put your own objectives to one side.

We refer to this as ‘client intimacy’, and this is a key pillar of the value proposition in our own business at Scottish Pacific. By truly understanding the business owner, we can work with them in helping to achieve their aspirations.

The responses recorded in our index reflect the tough landscape facing many SMEs, where owners and managers can be so focused on daily issues around cash flow, funding and HR that they may not make time to look at the big picture.

A third of respondents said they had no ultimate plans for their business, with one in five nominating good luck as a key driver.

A third were not clear about what was actually driving their business success.

When you have 34.9 per cent of small business owners indicating no concrete long-term plans for their business, this suggests a short-term focus amongst small business owners and decision makers.

Then there’s the fact that 20.9 per cent nominated good fortune as a key driver.

Given smart marketing (12.7 per cent) and technology integration (13.4 per cent) were lower down the list of key growth drivers, this suggests that greater engagement with professional advisers would help this group to pinpoint more accurately where and why they have been successful in growing their businesses.

On the bright side, 58.9 per cent of SMEs were still optimistic about growth. However, the average growth rate being forecast dropped significantly to 6.7 per cent from the 8.6 per cent indicated in our inaugural index, which was released in September 2014.

It was also interesting that SME use of specialist non-bank lenders has grown significantly, with 13.6 per cent naming this as a preferred method of funding future growth, compared to 10.8 per cent in our September 2014 index.

This suggests an increased awareness amongst SME owners that there are viable funding alternatives beyond the banks, though there is still a long way to go, and we see this as a massive opportunity for brokers whom we know typically have an excellent knowledge of the funding options available to SMEs.

The overwhelming majority of SMEs (89.6 per cent) do not look beyond their own funds and unsecured lending sources to fund growth.

High taxes and multiple taxes were recorded as key barriers to growth for the whole SME market (65.8 per cent), ahead of challenging credit conditions (63.8 per cent) and outright availability of credit (54.7 per cent), which again indicates a fantastic opportunity for brokers.

For SMEs who indicated they were growing, red tape (53.8 per cent) and cash-flow issues (51.8 per cent) were also high on the list of barriers to growth, along with the three barriers listed above.

Helping clients navigate these issues by securing for them the best possible funding options should be clearly on the radar of any broker looking to become a trusted advisor of their SME clients.