Kingston Smith reveals key factors for UK SME success

Posted on 25 Oct 2012 by Tim Brown

A report by Kingston Smith LLP and launched by Michael Fallon MP, Minister of State for Business and Enterprise at Google Campus earlier this month has revealed some of the key triggers which lead to SME success in the UK.

The research conducted by Professor Mark Saunders, Professor David Gray and Harshita Goregaokar of the University of Surrey was based on the views of over 1,000 business leaders (including 100 from manufacturing).

There are approximately 4.5 million businesses employing fewer than 250 people in the UK, providing a total of 13.7 million jobs, equating to half the private sector workforce in 2011.

According to the report titled: Success in challenging times: Key lessons for UK SMEs, the precarious nature of SME existence has been well documented. Only about 65% of small businesses are still trading after the first three years of initial start-up. After five years, fewer than 45% of businesses will have survived. Put simply, small firms are more likely to die than larger firms.

Indeed, other than size per se, the higher likelihood of death is what distinguishes small from large firms. However, multiple failures can be experienced as the springboard for later success (provided learning takes place). Much of the research into small firms has focused on their failure.

The danger of this approach is that it identifies what has gone wrong, but may fail to discover what they need to get right. The approach of the current study, then, is to focus on the triggers that lead to SME success, as a way of highlighting more effective strategy decisions for firms themselves, and to inform better policy decisions for government.

Some of the key findings from the report:

  • Successful SMEs are likely to use more than one source of finance to both start and sustain their business
  • Successful SMEs are willing to find new ways of doing things and
    encourage their employees to think and behave innovativelSuccessful SMEs proactively monitor their cash flow and liquidity
  • Successful SMEs proactively monitor their cash flow and liquidity
  • Successful SMEs consider direct referrals and search engine optimisation as central to their success

To view the research project mini report click here.