At Hitachi Capital Business Finance, we recognise that the health and strength of the small business community lies in its diversity. We all too often read about how the average UK business is performing, how they are reacting to issues or planning for the future. In truth, there is no absolute average – rather the range and diversity of people setting up and running small businesses is what makes the sector so fascinating. In modern Britain, being unaverage is perhaps the new average - and this new spotlight insight series allows us to share information on a range of small business typologies. These typologies are not defined by traditional metrics such as sector, business age, turnover or size: Rather, we seek to understand the people that run the enterprises - and we define each group by common behaviours, circumstances, outlooks or experiences.
This edition of the ‘audiences in focus’ insight series looks at a new generation of tech-enabled small business start-ups; enterprises that launched in - and are products of - the new digital era and fully use technology in the way they offer services, market to customers and enter new markets. These exciting young businesses are often run by younger entrepreneurs and may be focusing on establishing their business in the sector, growth and sales. Some don’t have offices, shop fronts or that many staff. Yet, these young, vibrant businesses often disrupt the status quo, bring new thinking to the market - and use data and the latest technology tools to drive growth.
The research was conducted as Britain re-emerged from lockdown in July 2020 and the timing of the study offers an interesting snapshot on how these business owners were adapting to what has been called the new normal.
Adapting to the new reality
During the testing period of national lockdown, businesses across the UK were forced to adapt to survive. Our own Business Barometer research showed that small business growth outlook plummeted to its lowest level on record during these summer months.
Coming out of lockdown, tech start-ups looked to seize the opportunity to adapt and grow at a time when many more traditional businesses were struggling and considering more defensive, cost-cutting measures. Overall, 89% of decision makers from tech start-ups said they had made plans to adapt their ventures to the new economic climate. Key priorities included: Launching new products and services that were responsive to the current market (22%) and picking up business from bigger brands that were suffering or contracting (14%). The speed and agility of the tech enterprises was also evident, with 14% of respondents saying they had switched work to countries where there were new business opportunities to exploit – and one in ten had pulled out of unprofitable overseas markets (10%).
Using technology to drive efficiencies after lockdown
During the lockdown era, technology dominated every aspect of life. People worked online, bought food and supplies online, watched concerts online, had medical appointments online, managed their money online and children did their schooling online. It was a taste of the future brought forward 10 years or so - and it underlined the important role technology played to help keep small businesses going.
Coming out of lockdown, tech-enabled start-up businesses have also done a great deal to further utilise technology to make their operations even more efficient and effective. Almost one in four of these enterprises (24%) reported they were selling more goods and services through online channels and 20% invested more in their company’s digital marketing capabilities in order to reach new audiences. There was also a 20% uplift in the proportion of tech start-ups that had invested in doing more of their customer service and supply chain liaison through online channels. Video calls online have become standard practice throughout lockdown and 18% tech start-ups will make online video calls the standard for staff communication in the months ahead.
Our research also found that, 13% of bosses from tech enabled start-ups have had the foresight to review and invest in their company’s server and IT systems so in the event of a second lockdown they would be better prepared.
Avoiding cut backs
Whilst tech start-ups are, by their nature, agile businesses, those in charge have introduced a raft of measures to avoid letting people go. More than one in five directors (22%) have taken pay cuts themselves, and they have focused more on growing income rather than defensively retrenching and cutting back. Overall, 22% of these enterprises have proactively looked for new business, 18% have focused on workplace productivity and 17% have explored ways to diversify the business and – in doing so – to broaden opportunities and reduce implicit risk.
Seeking finance to secure growth
Supporting the general approach of these businesses to adapt to seek growth opportunities at a time of uncertainty, tech start-ups recognise the need for business finance in 2021 to help them to secure growth and to diversify. Overall, 72% of these businesses recognised they would need to secure further funding in 2021 – and the average requirement was predicted to be around £53,000.
Safety at work
Almost all owners and directors of tech-enabled start-ups (96%) have moved quickly and decisively to put the health and safety controls in place to allow staff to return to the workplace. Beyond conducting new risk assessments, almost one in five (19%) have rearranged the layout of their workplace to ensure greater social distancing so people can work safely. A further 16% have spent more time supporting the wellbeing and mental health of staff.
Wellbeing and motivation
Not only do small business owners have to look after the growth of their enterprises, many also place great importance on the health and welfare of their employees. Motivating staff and maintaining a happy workforce is now a top priority for more than 60% of small business owners that run tech start-ups. Many also recognise the importance of motivating and inspiring staff since lockdown. Key initiatives adopted include: Offering flexible working hours (31%), running motivational team meetings (11%), organising one-to-one pastoral calls (10%), as well as reassuring staff of their job stability (7%).
Bosses of tech-enabled start-ups were likely to maintain a healthy work-life balance during the challenging economic climate. Key activities included: Cooking more meals from scratch (27%), spending more time in the garden (22%), going to bed earlier (20%), going for a decent walk each day during the working day (19%) and being more aware of mental health issues and hope to cope with stress (17%).
A little helping hand
Being able to talk to someone about worries and concerns was also seen to be important part of looking after personal well-being. More than nine in ten bosses of tech enabled start-ups (92%) said they have sought help and information during the height of the pandemic. In keeping with their focus on tech, many had sought help and advice from tech channels – 39% doing online searches, 23% looking for advice from social media and 17% asking Siri and Alexa questions. In contrast, 30% had sought counsel from family members, but only 28% had turned to professional advisers.
Joanna Morris, Head of Insight at Hitachi Capital Business Finance comments:
“We live in the technology age where data and the application of new technology tools will drive success in business. With this in mind, it was good to survey a sample of young tech-enabled business start-ups, enterprises at the start of their journey which, from day one, are using technology to frame what is possible and how business plans are designed.
“This research was conducted as small businesses re-emerged from lockdown. It is significant that tech start-ups have seen uncertainty as an opportunity – a time to adapt, to refocus business on profitable markets and to look at how they can expand – before considering options on consolidating.
“Hitachi Capital Business Finance specialises in helping small businesses that are a little further on their journey, but there is much that more mature businesses can learn from the zeal and passion of tech start-ups. Agility will be a philosophy that every small business needs to embrace in the months ahead, and at Hitachi Capital we will look to support small established businesses that have the hunger to grow, that embrace change as an opportunity and that believe in what is possible tomorrow.”