Supporting SMEs
February 2020
Taking a horse to water, and making it drink
There’s plenty happening in the SME arena to strengthen the proverbial backbone of the economy. The government has been fighting the bad debt crisis seriously affecting SMEs operations on a number of fronts. And although the requirement for large businesses to report on their payment practices has been around for some time, since September 2019 any supplier who bids for a government contract above £5 million per annum will need to answer questions about their payment practices and performance. Suppliers are now expected to work beyond even the expect target of paying 95 per cent of invoices in 60 days and aim for 30 days instead.
In July 2019 18 businesses were suspended from the voluntary Prompt Payment Code for failing to meet their commitment to the 60-day standard. The British Business Investments arm of the state-owned BBB (British Business Bank) has been supporting providers of all types of finance – debt, equity or alternative types such as P2P – to smaller businesses since 2016. Up to £275 million is provided via the Incentivised Switching Scheme to participating banks, to encourage SME banking customers to switch their business current accounts and loans to them, which can help SMEs get better terms or diversify their debt financing portfolio.
However, reports of a breakthrough in SME financing are yet to emerge. Amid accounts of slow positive trends is frequent news about how SMEs don’t take full advantage of the incentives, databases and tax breaks set up to make them thrive. And although the number of SMEs claiming R&D tax credits to drive innovation has been steadily on the rise, there are still plenty that fail to claim what they’re owed. The Times recently reported that RBS may need to extend its August 2020 deadline for switching 120,000 SMEs to partner banks – in line with the Incentivised Switching Scheme – to remedy the damage its bailout caused to competition in the sector, and the rate of switching has slowed down in the last six months.
It seems that the measures taken by the government to financially empower SMEs aren’t yet adequate to offset the setbacks that the shocks precipitated by the collapse of Carillion or peer-to-peer lenders Lendy and Funding Secure. When big players such as these go down, the trust of lenders and large suppliers can go down with them and the negative impact will ripple through supply chains and the financial system, as supply chains and lenders retreat from the SMEs who pose the highest risks.
Some fintechs and legtechs have already identified the market opportunities resulting from SMEs being underserved. However, if you compare the sophisticated technological services these start-ups have on offer with the kind of difficulties SMEs are struggling with on a daily basis, there still seems to be a sizeable disconnect. Although outstanding payments are indeed very high on SME owners’ list of bugbears, the other problems are more mundane than you might expect, with a considerable number expressing concerns that they don’t have the right skills to run a successful business, manage their accounts or manage taxes and invoices.
The question is, when will the services offered for SMEs by fintechs and incumbents to liberate SME owners from the drudgery of running a business mature to become easily available and affordable for the target audience? And are disruptive business services eventually going to enable SMEs to help themselves to an abundance of financial opportunities that they now can’t help but miss?
by Zita Goldman, Business Reporter
The last six months in…
Recent developments in the world of small to medium businesses
Small Business Saturday, launched in 2010 by American Express in the US as a counterpart to Black Friday and adopted by the UK eight years ago, generated an estimated £800 million spend in small UK businesses, with a record turnout of 17.6 million people choosing to shop small on the day. The event takes place on the first Saturday of December, to support, inspire and promote small business.
Alipay, owned by China’s Alibaba Group, has set a target to support ten million SMEs in Europe by 2024. The firm has extended its partnership with Worldline, allowing European merchants to accept payments through Alipay-enabled points of sale. Currently Alipay works with 120 financial institutions across Europe and is constantly adding more partnerships to its network. Barclays, Alipay’s partner in the UK, will integrate Alipay capabilities within its own Barclaycard POS solution.
Chinese banks released lending standards and lowered their interest rates in response to the Chinese government’s initiative to boost SME financing last December. However, concerns are growing that a surge in lending to sub-prime borrowers could result in an increase in bad loans rather than a boost to the real economy. Many lenders are pricing small business loans at below the 8 per cent average cost of funds for small business loans in support of the government’s directive of sacrificing banking profits to rescue small firms.
The new FCA rules on Peer-to-Peer (P2P) lending, which came into effect on 9 December, mandate P2P lenders to classify their investors into four categories – ranging from Everyday Investor to High Net Worth Investor – as well as carry out appropriateness tests. By implementing these rules, the FCA aims to ensure that investors fully understand the risks P2P lending involves. The regulation has been introduced after two major P2P lenders went into administration within a few months. Peer-to-peer lending websites are industrial-scale online financial matchmakers. With no banking middleman, investors on P2P platforms can get rates much higher than from a savings account, while borrowers often pay less than with a conventional loan.
Philip King has been appointed interim Small Business Commissioner, and will take responsibility for transferring the administration of the voluntary Prompt Payment Code, which he was the architect of.
King has worked closely with successive governments in championing best-practice credit management and supporting small business. The government will shortly recruit for a permanent Small Business Commissioner and has committed to strengthening the powers of the role to hold to account the minority of larger businesses who fail to make payments on time.
by Zita Goldman, Business Reporter
The future of your business depends on understanding your data
Deeper thoughts
Solving the productivity puzzle
Effective mentoring can help individuals make vital connections and ensure organisations are able to boost engagement and productivity. But facilitating that is no easy matter.
According to the Office for National Statistics, productivity in the UK fell at its fastest rate in five years in the second quarter of 2019, continuing the trend of recent years. The UK is not unique in facing what has been called the “productivity puzzle”, but it is one of the more glaring examples.
There are many contributory factors for this, but one fundamental reason is that a bad culture means many organisations are failing to get the most of employees and their capabilities, leading to low levels of employee engagement and a lack of innovation.
But, for many organisations, the answer to greater productivity may be closer to home than they think. According to research, employees that are mentored are seven times more likely to be engaged, six times more likely to be promoted, and are an average of 8 per cent more productive than those who are not. Furthermore, they boast a 20 per cent higher retention rate than other employees.
The problem, though, is that while around 75 per cent of Fortune 500 businesses run mentoring programmes, these are often flawed, inconsistent and hard to maintain, and tend to reinforce existing silos, meaning they fail to address key issues around inclusion and diversity.
Two years ago, Ed Beccle – then still at school – hit on the idea of a tutoring app which could connect school pupils looking for extra support with university students able to provide that, and then sought to expand this concept into the world of work.
With his co-founder Henry Costa, who had come off the back of large success in African Fintech, Beccle created the result – Grasp. A platform designed to enable every employee from any level in an organisation to connect with others in the business, creating a culture of engagement and helping to improve productivity. The platform has since gone on to attract investment from some of the biggest names in business, as a result of cold emails, a game of squash and a very impressive network.
“We’ve always had the ethos that everyone has something to share and learn, and it doesn’t matter how senior or junior you are,” says Beccle. “In huge businesses, everyone combined must know everything but it’s how you work out who knows what and then how you connect with that specific person.”
Grasp offers a number of products designed to help organisations overcome the issues of low levels of staff retention, productivity and engagement, and bolts on to existing HR software. All its products revolve around the core belief of connecting users in a smart way through the use of both new and latent data sets. Mentoring is Grasp’s flagship product, aiming to disrupt the way mentoring programmes work in enterprises. Grasp believes in being the catalyst and spark for new and meaningful conversations where everyone has something to offer.
Once introductions have been made, individuals can either connect through a Zoom call or arrange to meet in person, depending on their location and the nature of the liaison. “Technology plays a huge part in bringing people together although it’s really important to get people meeting up in person,” says Beccle.
“There’s a huge opportunity that’s missed in just meeting people. But a lot of the time people barely know what the person 12 steps away from them does, let alone two or 10 floors above.” He’s keen to stress, too, that it’s not just a case of more junior staff being mentored by more experienced ones, as often younger employees will have skills that can be useful to older workers.
Embedding the technology that can help organisations make the most of the skills and experiences they already have in the business can create a culture where mentoring is truly effective, he adds, bringing direct benefits to the bottom line.
This is likely to become even more important as Generation Z enters the workplace, believes Beccle, and organisations need to do more to engage them and tackle the productivity crisis. “This will get better and bigger,” he predicts. “Every company will need to use something like this in future.”
For more information on how Grasp can help your business, visit http://grasp.hr/
Fostering the govtech ecosystem: supporting SMEs in the public sector tech market
Small and medium-sized enterprises (SMEs) have a critical role in driving innovation in public services, and the case for bringing more SMEs into the public sector tech supply chain is well-made. As the digital economy grows, the public sector must prepare itself for the high level of service and convenience that citizens will expect when accessing public services. Public servants will expect to be able to use during work the same sort of tech they use outside it. In order to transform public service delivery, the government must harness emerging technologies. Doing so requires sourcing of innovative tech from a broad supplier base.
The coming decades will bring significant challenges for the UK’s public sector as it strives to deliver more value for money while meeting the needs of an ageing and, crucially, a more demanding population, as citizens become ever more consumer-like in their expectations of public services. In the UK, our consumers are some of the most prolific online shoppers in Europe. Expectations and demands are increasing as retail and online experiences improve. Entire business models are built on the idea of delivery at the touch of a button.
As advances in the digital economy march on, the public sector must prepare itself for the high level of service and convenience that citizens will expect when accessing public services, too. We have to accelerate the transformation of public services through the smart application of digital technology. So the government must work with innovative SMEs that can bring innovation to transform public services.
In order to help SMEs navigate the govtech landscape and make the most of the opportunity, we recently produced some guidance forsmaller tech companies.
But it is not always easy for those SMEs to get a foot in the door. The government has set a target to spend £1 in every £3 of its procurement budget with SMEs by 2022, and has taken a range of measures to achieve this, such as SME Champions and SME Action Plans for every department, as well as the Crown Commercial Service’s new innovation marketplace Spark.
But despite recent efforts, selling tech to government remains disproportionately hard for smaller businesses. Last year techUK’s annual Govtech SME survey found that 68 per cent of respondents said the government has not acted effectively on its commitment to helping small businesses break into the public sector market. Indeed, it seemed that SMEs were less confident that the situation will improve significantly in the short term, with only 37 per of respondents saying they felt the government’s SME target is achievable in the next five years, down from 49 per cent in the same survey last year. We are currently rerunning the survey (please do complete it if it’s applicable to you), and it will be interesting to see how confidence and views have changed when we publish the results next month.
In order to help SMEs navigate the govtech landscape and make the most of the opportunity, we recently produced some guidance for smaller tech companies. The guidance covers the importance of various procurement frameworks; how to make the most of early market engagement opportunities, and advice on how to forge fruitful partnerships with established players in the sector. It also explores the nuances of the various public sector tech markets (central departments, defence, blue light services, health and social care, local government).
As well as helping government departments access a broader range of innovative suppliers, techUK hosts SME focused sessions such as innovation dens and networking events to help support SMEs access this market. And later this year our Central Government Council will be producing a Collaboration Playbook – a best-practice guide that will highlight the behaviours that will lead to more productive collaborations between large and small companies in public sector tech.
It is our ambition that the UK should become as well known for govtech as it is for fintech. And we hope that the guidance in our Fostering the Ecosystem report and upcoming playbook can help make that ambition a reality, and help to build a smarter state.
by techUK
Why it pays to empower the whole organisation with customer feedback
In this fast-changing retail age, experience now ranks higher than product or price. Research shows that over half of customers won’t return to a store after just one unresolved negative experience. So understanding customers and what they think and feel has never been more important.
Yet it’s becoming increasingly difficult to gather customer feedback, and to tap into its true business value. Today’s customers are overrun with surveys, emails and special offers tempting them to share their views. Low engagement and dropout rates are a growing challenge. There is also a huge risk that the data customers share across the many channels now available to them gets stuck in disparate silos and spreadsheets, where it delivers zero benefit to the business.
So how can companies successfully get the insight they need and use it to drive their business forward? It all comes down to learning how to listen to customers – and how to effectively take action as a result.
Securing the voice of the customer and deploying the resulting insights can have a transformative effect on performance, profit and customer experience. But only if it’s collected and used in the right way.
For Critizr, that means a whole company approach. We view customer feedback as a driving force at every business level – from HQ to shop floor, not just in the marketing department. Our approach hands the keys to customer-centricity to front-line teams, making them more agile and effective. This local empowerment is the core factor in the success of our platform
. So, while Critizr generates feedback and insight for senior management to plan for the long term, staff in the field can quickly and efficiently take action at local level – doing what it takes to solve problems, win back dissatisfied shoppers and drive loyalty and revenue.
The money story behind local empowerment is compelling. A recent study conducted by Critizr in conjunction with the CX Institute assessed the value of improving customer experience. Our study showed that 53 per cent of customers who’ve had a bad experience can be turned into promoters if their issue is addressed within 48 hours. Promoters spend more, are more loyal and will actively advocate on a brand’s behalf.
Critizr’s experience with leading brands across Europe proves the positive results of transforming all employees into powerful customer champions in their own outlet. On average our clients see a 10-point increase in NPS (the Net Promoter Score, one of the most effective customer satisfaction metrics for modern businesses) in their first year of working with Critizr.
The future of retail relies on businesses and brands using customer experience and feedback to differentiate themselves, drive value from their retained customers and ultimately increasing the bottom line. What better approach could there be than to empower the entire organisation to truly understand what customers want – and then to take action to provide it.
By Douglas Mancini, VP Sales EMEA, Critizr
To understand how to empower your whole organisation using customer feedback with Critizr click here.
Movers & Shakers
Fuel wellbeing and collaboration at work with food
As a new generation enters the job market, corporate wellness benefit programmes have become the norm rather than an exception. Criteria such as working conditions, work-life balance or health benefits have become as, if not more, attractive in the job market as high salaries.
The fast-growing start-ups – especially those in the tech industry, such as TikTok – understand that if they want to attract and retain the best talent in the market, they need to invest in wellbeing and happiness at work. TikTok has been collaborating with Deliveroo for Business to provide food for its employees as part of its employee perk programme. With weekly team lunches and events caterers, it’s part of TikTok’s strategy to boost morale, which has contributed to its 4.1 out of five star rating on employer review website Glassdoor.
“For TikTok, it’s really important to have food as part of our employee wellbeing programme,” says TikTok’s Eleanor Payne. “We really want the best talent working for us, and in order to achieve that […] it’s almost an industry-standard to provide amazing food.”
Providing quality food at the workplace has become a growing requirement, and the stakes to get it right are high. This is a multi-billion-pound market that covers late-night workers, event catering and “cloud canteens”. This trend is global, too. Companies are walking away from traditional canteens that provide a low level of satisfaction with poor quality and variety of food. They are often expensive to maintain, and produce a large amount of food waste. In contrast, “cloud canteens” such as those powered by Deliveroo for Business, are more flexible and cost-effective. With 67 per cent of UK companies now offering allowances for team lunches and 47 per cent providing food for meetings*, “FoodTech” actors such as Deliveroo for Business have understood the need to provide custom services for corporations.
“Food enables employees to gather around a table and chat, share ideas, and collaborate,” explains Juan Diego Farah, GM and Global Head of Deliveroo for Business. “It genuinely creates an amazing opportunity for them to take a step back and engage with their colleagues.”
Deliveroo for Business was originally launched three years ago to target late-night workers, but the opportunity and demand for food in the workplace have evolved quickly and Deliveroo’s catering business is growing fast. It’s now increasingly common for companies to highlight on their job descriptions that they offer Deliveroo for Business allowances as part of their corporate rewards package.
To win the corporate market, innovation is key. Gone is the time when companies would settle for boring sandwiches or pizzas and beers. Now, corporate clients want to be delighted with creative caterers or restaurant pop-ups and provide amazing experiences for their teams.
For more information, visit deliveroo.co.uk/business
*Survey conducted in November 2019 among more than 500 companies currently partnering with Deliveroo for Business
Jargon buster
Events
Funded Internships for London SMEs
4 March 2020,
Passmore Centre, London
If you’ve been considering digitising an aspect of your processes, creating a new digital product or expanding your digital skills set, this event will prepare your business for fully funded work placements that will support your adaption of digital technologies and processes.
The Northern Business Expo
17-18 March 2020, Manchester Central, Manchester
A free event where attendees can learn directly from the experts at Google in the Digital Garage, hear inspiring stories from the keynote speakers and pick up skills in the sales and marketing workshops. They’ll also have access to funding for their business stage and be able to network with the largest group of professionals in the north.
Social Media for Small Businesses
25 March 2020,
Hopkins Room, Stratford Library, London
The power of the internet for small businesses cannot be underestimated in terms of generating new customers, communicating more efficiently and streamlining the presence of a business. This session will cover the basics of what the internet can offer your business.
SME Conference 2020: Thrive and Transform
24 April 2020,
ICAEW, Chartered Accountants Hall, London
The Conference brings together SMEs to engage with expert business leaders, authoritative thought leaders and thriving companies, who will offer tangible takeaways and insights into successful and sustainable growth. The topics are broad and business-critical and attendees will have immediate access to professionals in all key areas.
Source: Zita Goldman, Business Reporter
