Small businesses may well be the backbone of the UK economy – latest data from the Office for National Statistics reveals that 2016 saw a rise of 135,000 such firms from 2015 – but they also face the most hurdles.
The scourge of late payments, less favourable lending terms, red tape and legislative updates from increases in pension contributions to data protection can all take their toll.
According to research by company formation agent Turner Little, so-called business deaths – the percentage ceasing to trade as a proportion of active ones – increased by 11.6 per cent between 2015-16, with the five-year survival rate for a firm born in 2011 still active in 2016 being just 44.1 per cent.
But perhaps top of the list of challenges for small firms is finding the staff they need to grow. It’s a fact that many larger rivals can hand out salaries that most small businesses are simply unable to compete with. Data from Opus Energy finds only 30 per cent of small firms pay above-average for their sector, while for microbusinesses it’s even less, at just 20 per cent.
Research by the Centre for Economics and Business Research finds more than a quarter (27 per cent) of small firms are worried about how they’ll pay for a new hire, while a recent poll by Forde HR Cloud really does cut to the chase: 19 per cent of small firms say salary expectations are one of their top three hurdles, behind lack of skills and scarcity of applicants.
But are there other ways in which small firms can turn the tide and compete on more of a level playing field? The answer is most definitely yes, as FSB members are proving.
According to a report by the now defunct UK Commission for Employment and Skills, 42 per cent of employers want to offer more training, but feel constrained by pressures like cost and time. But those that do bite the training bullet will be fulfilling what many staff really want from their workplace – job satisfaction and enhanced skills, according to Katie Streeter-Hurle, Director at FSB member Shopper Media Group, a collective of three media agencies in London, Liverpool and Manchester, which delivers campaigns for the likes of Kellogg’s, the Co-op and Samsung.
“We have 100 staff and spend more than £100,000 per year on training... Our point of differentiation is that our training offers people a real chance to succeed. We’ve made 38 promotions in the last year and believe it’s partly why our attrition is so low: just 11 per cent compared to the industry average of 29.4 per cent.”
Not only does Shopper Media Group have its own in-house training programme, called SMG University – which ensures staff get the right training interventions at the right time, an added bonus is that it also offers all staff a £500 training pot they can use as they please, as long as it has work relevance.
Staff have booked courses on a range of areas from presenting to resilience or mindfulness. The deal is that they have to present back on what they’ve learned. “Staff are also given a ‘project’ each, unrelated to their job, like doing our PR or corporate social responsibility,” says Ms Streeter-Hurle. “This gives them new experience around managing time and broadens their skill sets too.”
Even though most small firms do offer flexible working, making this particular perk a hard guarantee rather than simply a right to request it is now increasingly being seen as better than offering more cash. Among FSB members which employ staff, 74 per cent have at least one employee working flexibly.
Investors in People finds 34 per cent of staff would rather work flexibly than take a 3 per cent pay rise because not only are workers more time-pressed (the so-called sandwich generation have young children and ageing parents to look after), but new entrants – the millennials – simply expect it.
Coventry-based Broad Lane Vets, recently crowned the UK’s most flexible small business, is one such firm. Staff can work from home when they have non-clinical duties, using instant messaging to communicate, and many work flexible or part-time hours.
“Some people prefer to work split shifts to get home for horses or dogs,” says director Elly Pittaway. “Others have childcare to think of. We have a lot of part-time workers; at least half the staff, from just one day a week to four days a week.” It makes good business sense too; all this means the FSB member is still able to provide a seven-days-a-week service.
FSB’s legal helpline can advise members on employment contracts, including flexible working policies. For more information, visit www.fsb.org.uk/benefits
Child shoe manufacturer and FSB member Start-Rite might have 226 years of history in its favour, but geography (it’s based in Norwich, Norfolk) presents its own unique problems. “You don’t tend to end up in this part of the world by accident so, when it comes to attracting talent, we have to help people as far as possible,” says CEO Ian Watson, the firm’s first non-family head.
To do this he decides which roles are ‘best in class’ (like shoe designers – people he wants to poach from the likes of Clarks or Dr Martens), and those which simply require ‘expertise’, like being a finance director.
“We then target two types of employee: those who are already successful and want to carry on being successful but who also want to relocate out of London for a better standard of living; and those who may have originated here, but want to return. Once we identify these people, we will then absolutely help them with relocating, either finding them somewhere temporary, or paying for them to rent while they look for somewhere permanent.”
Mr Watson says he would rather do this, and have people all in the same building, contributing ideas, than being cut-off from their colleagues working remotely. He says the strategy works, because his 86-person business is stable, and he does attract the best people to move.
There are legal minimums – a pension and holiday pay – but many firms seek to go beyond this, offering access to discounted products or even full employee benefits schemes. But where smaller firms can really make a difference is by creating attraction-boosting perks that are unique to them and their workforce.
BrewDog – the Scottish craft beer business – hit the news last autumn when it revealed it offered ‘pawternity leave’ – paid leave to its predominantly dog-loving staff.
The time allows them to integrate their new pets into the family home in the same way that a newborn baby demands. “We didn’t want staff to eat into their holiday, so now offer all staff a week’s paid ‘puppy’ leave,” says Allison Green, People Director. “The only direct cost to us is the time off, but we know it makes our people less stressed.” It doesn’t just offer these; sabbaticals are also offered, while 10 per cent of its profits are split equally among staff too – ideas others could copy.
Because of their size, small businesses can really focus on meeting the specific needs of their employee composition – like offering ‘care days’ for those with elderly parents, or debt consolidation benefits to help younger staff consolidate loans or debts they may have through payroll at a lower-than-usual rate of interest.
Recruitment consultancy Yolk also rewards staff with meals out if they hit their monthly, quarterly or yearly targets, while those who bring in £25,000 of new business in a year get an extra day’s holiday. Small firms are also uniquely placed to offer shares or stakes in the business. Here, effort is truly rewarded. Recently, The Chestnut Group, which operates six restaurants in Suffolk and Cambridgeshire, recently announced it was giving a 10 per cent stake in the business to its 140 staff.
Partly due to the rise of flexible working, the ‘office’ has to work harder to become a ‘destination’ employees want to go to. Data shows the office is still an important fixture – millennials crave face-to-face collaboration, according to Randstad – so a little thought in cultivating the right environment which complements the culture organisations want to create can go a long way.
Yolk, which has around 33 staff, has taken this extremely seriously. “We’ve specifically invested money to create a fun and attractive working environment,” says Talent Manager Natalie Williams. “We’re in a competitive sector, trying to attract degree-holding specialists, so anything extra we can do is really important.”
At its head office, staff have access to a pool table, and can play video games in a specific break-away area. “Our staff are aged 24-38 so they expect a relaxed but interesting work environment,” she adds. “While it may not explain all our retention, only two people have left us in the last six months, so we believe it does have some impact.”