Bijou business must play to its strengths: the benefit of micro-businesses
By Dan Watson Thursday, 29 November 2012
Small firms account for 99% of all UK companies and make up the back bone of British enterprise, but they are vulnerable to economic turmoil and must be agile and swift to capitalise on new opportunities
Napoleon famously referred to the British as a "nation of shopkeepers", but it was in fact the great economist Adam Smith who coined this phrase in his influential work The Wealth of Nations (a good fact to trot out next time there’s an awkward silence at a dinner party).
Regardless of the provenance, though, what was true of the UK in the late 1700s is much the same now. The Federation of Small Businesses has noted that there are now 4.5m small business in the UK, accounting for a staggering 99% of all firms in the nation.
According to a report last year from the Office for National Statistics (ONS), 85% of all UK print firms employ fewer than 10 staff, which means they qualify as micro firms, and two-thirds employ four people or fewer.
Clearly, such firms are a vital component of the wider economy, but the very small are also those that are often hit hardest by the merest fluctuations in the economy. The question is: how much longer can they sustain their prominent position in print, as larger firms hover for acquisitions and as economic pitfalls become ever more numerous?
The issues that have blighted the banking industry over the past five years and the knock-on effect on the world economy have obviously hit the printing market hard. Alec Sharples, managing director at 11-staff Welsh print outfit Fineline Print, says small firms have been on the front line.
He notes that customers’ jitteriness about the perilous state of the financial markets hits the smaller firms first. "During the banking crisis in 2008, when it dominated the news, we definitely saw takings drop. Then the Russell Brand saga [when the comedian insulted actor Andrew Sachs’ granddaughter] hit the headlines and took the financials off the front pages, and we saw an immediate recovery."
Things have got better since then, but it’s still tough for smaller printers to plan ahead, he says.
"We seemed to be coming out of the recession prior to the 2010 election, but by the year’s end, it had turned sour," he explains. "This year started well, but around the Jubilee weekend, it was dreadful. Since then, however, summer definitely picked up again."
And the fact that the banks have seemed reluctant to fund projects that would help counteract the problems hasn’t helped. British Association of Print and Communication (BAPC) chairman Sidney Bob argues, though, that this has been a long-standing issue for small printers.
"Small businesses are in a tough position with bankers, as they feel that they are in no position to bite back. This has always been a problem," he says.
Another issue not helping small printers is the fact that smaller firms can still not get enough access to the lucrative tendered work markets, according to Michael Moradian, from PrintExpress, a Printing.com franchise firm of three employees in Colindale, north London.
"A local council invited us to a tender process launch and made a big play about the fact no company would be excluded based on the size of their turnover. I thought ‘great’, and looked into applying soon after," he explained.
From there, though, he reveals it turned into the usual bureaucratic process where the council required forms relating to the firm’s health and safety policies, employment policies and even its last three years’ financial performance.
"Why?" asks an incredulous Moradian. "That’s the sort of thing I should be asking them for, if anything – their payment dates and processes and so forth. We don’t have the time to focus on these sorts of things."
Bobb explains that the lack of time available to those running small businesses is the key problem curtailing their ability to react to the economic circumstances. The difficulty for smaller firms, he explains, is that the owner is almost always on the shop floor, rather than the boardroom. "Most owners of small firms are working in the businesses as opposed to working on the business, so they don’t have the sufficient time or energy to look at new opportunities to expand into new areas," he says. "For example, they have no official accounts department, so they are personally burdened with all the administration this requires."
Bobb is sympathetic to this plight, but also says some firms use it as a "crutch" to avoid driving new ideas in the business. "It’s an excuse used to prevent them trying to attain new business – people don’t want to move out of their comfort zone."
Small firms are often put at a disadvantage by their inability to chase new revenue streams when existing ones begin to fail. Thankfully, some are managing to buck the trend and many small firms in the market are striving for new business – and succeeding. For example, Fineline Print has been going for over 20 years and now employs 11 people.
The firm has always taken a proactive approach to finding new avenues of work, according to Sharples. "We were one of the first firms to move to the web-to-print market some seven years ago and our e-commerce work now accounts for 37% of our business. It’s not our biggest revenue earner, but it’s certainly not work you’d want to lose, either."
The firm has tackled Bobb’s issues of a lack of time and human resources by accepting these issues and looking outside for help. This has involved building up a ‘mastermind group’ of experts that can be called on for advice and guidance to help develop profitability strategies. Nick Devine, of industry consultants The Print Coach, is one such expert.
"You cannot be the master of everything," admits Sharples. "You need many specialist skills and we’ve learned that you need to seek out the people that can complement your weaknesses – in marketing or sales projects. This is critical to business success."
Getting over the hurdles of being a small business in recession is clearly possible, then. Sharples adds that being a smaller company also makes it easier to cope with the business problems suppliers experience.
"When Press-sense got into trouble [it filed for bankruptcy in 2010] we were able to search and sign up with an alternative – RedTie – in two months. This is something a larger firm would probably have had a lot more trouble doing," explains Sharples. "Being small means we can be nimble and respond to opportunities or issues quickly."
Far from a disadvantage, therefore, being smaller can actually sometimes be a major advantage in times of economic trouble. It has certainly helped Fineline tick along as a profitable firm for many years now, says Sharples. The company has built up a good, long-term customer base who know and trust it.
‘Trust’ is a word that appears a lot in the lexicon of the small business owner, as they know it’s another advantage that should be played up. Moradian from PrintExpress argues, though, that small firms need to play off this advantage even more.
"It takes time to build this trust," he says. "Just as you wouldn’t ask a girl to marry you on the first date, you have to develop the relationship with customers over time. Small firms are well-placed to do this; with a smaller firm, you are more likely to be speaking to the same person or people for each transaction. It’s a big plus that needs to be capitalised upon."
And while the recession hit many small firms hard, for some it proved a blessing in disguise, as it forced both larger printers and their customers to reassess how they worked, as David Henningham, the owner of London-based Dalston Bloc explains.
"Around the time of the crash, firms started looking at how their services were being provided and we were being contacted more and more frequently. It was a real boom time," he explains.
The firm specialises in services such as foil blocking, screen printing and bespoke binding and is run by Henningham and his wife Ping, with the two splitting their time between working and looking after their baby – a nice perk of running your own operation.
Focusing in such niche areas has made Dalston Bloc a valuable partner for many larger firms, who call on its services to ensure they can fulfil any requirements customers may have around these areas, without having to buy the kit themselves. While he concedes that the admin is still a headache for the pair to cope with, he says being a dedicated small operation in a niche really works.
"No firm can really afford to turn work away, so if they can’t meet a certain aspect of an order or need to get something turned around fast, they come to us," says Henningham.
So while the ONS data at the start does represent a declining number of small firms in print, and though this could be seen as negative for the continued existence of the sorts of firms listed above, there is also another interpretation: the survival of the fittest. While the numbers are decreasing – either through closure or acquisitions – those remaining are agile, innovative and highly skilled. This enables them to succeed in the face of some of the toughest years of trading experienced in almost two decades.
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