Small business owners turn to innovation

International research released has revealed the true resilience of small business owners – who are responding to challenging trading conditions with new products or increased efficiency.

This is the message from a report, by insurer Hiscox based on responses from 3,000 small business owners in the UK, US, Netherlands, Germany, France and Spain.

Among the key findings are:

• Nearly one in three launched a new product or service in the past year – and two thirds of those are planning another in the next 12 months as small businesses look to gain competitive advantage through innovation.
  
• 38 per cent of small business owners are optimistic about the year ahead, down from 48 per cent a year ago.
  
• Only one in ten small businesses plan to take on new staff in the coming year – but nearly two thirds expect to avoid redundancies.
  
• Despite the introduction of incentivised lending schemes, over three quarters of respondents say that finance for a new business is hard to find.
  
• While the average small business owner works 41.1 hours a week, those in Britain work the shortest week at 37.6 hours and have the most elastic definition of what constitutes 'work'.
  
• Small business owners have a clear agenda for Governments: reduce direct taxation, simplify accounting rules and stimulate lending. The British are the least critical of all six countries of Government bureaucracy and labour laws.

Bronek Masojada, CEO at Hiscox, said: "Our research findings support the idea that small businesses are adapting to 'the new normal', anticipating tough trading conditions rather than expecting any early return to the boom years of the last decade. They are responding to the changing business environment with determination and inventiveness – launching new products or services that put them ahead of the competition, and investing in training and up-skilling.

"They also have a clear agenda for Government, something policy-makers would be wise to study as they work towards securing a sensible and sustained economic recovery in each of these countries."

Entrepreneurs

The findings shine a light on the tough trading conditions faced by entrepreneurs. Although just over a third said that revenues had increased in the past year, that figure has fallen from 46 per cent in 2012. At the same time, just under half reported customer growth compared with 60 per cent in 2012, and just over half said their customers were taking longer to pay – putting increased strain on already vulnerable businesses.

Finance is still proving tough to come by. Over three quarters of respondents said they had found securing finance for a new business difficult, with only the British saying that securing finance is easier this year.

Against this backdrop, optimism levels have generally fallen back since last year's study, though there continue to be more optimists than pessimists.

Innovation

The research found that nearly one in three respondents had developed a new product or service in the past 12 months. The American response was the lowest and the Spanish the highest. Just over half of the innovators said their sales expectations had been fulfilled and nearly two thirds planned further innovation in the coming 12 months.

More than half of respondents or their colleagues (55 per cent) had engaged in some form of training or professional development in the past year. The proportion was lowest in France and highest in the Netherlands and Spain. The average time spent on training and development was just over six days, and the Spanish were the most committed in this area, investing an average 9.9 days. Most popular was trade, technical or professional skills development.

Despite the challenges they faced, more than half of respondents continued to prefer running their own ship to being an employee. The most commonly cited benefits were greater flexibility in working hours, the ability to influence the direction of the business, more control and pride in one's work.

Agenda

Against a challenging trading environment, 38 per cent of entrepreneurs said that a lack of Government support is their biggest fear for the year ahead. In addition, and for the first time, the study asked respondents to rank on a scale of one to ten the key policy initiatives they wanted to see from Governments.

Reduced direct taxation, simpler accounting rules and stimulation of new lending topped the agenda. Interestingly, the British were the least critical of Government bureaucracy and labour laws. On these issues, together with taxation and a risk-averse national culture, they have become less critical over the past two years. They are the only national group to have done so on all four issues.

What constitutes 'work'?

The research also asked respondents what activities they felt constituted 'work' and highlighted major variations between countries.

Nearly half of all respondents counted travelling to and from work as work, and 37 per cent considered they were working if they ate lunch at their desk. The British had the most elastic definition of work in three categories: lunching, networking and attending to emails out of hours.

While the average small business boss works 41.1 hours a week, the British work the shortest week at 37.6 hours – six hours less than their German counterparts.