Building a sustainable SME business through effective Corporate Governance

SMEs represent the backbone of the UK economy. In fact, many economies globally. They are positive about growth, they are planning for growth, and they’re focussing on long-term business success. And when we look at some of the latest statistics coming from the Department for Business, Energy & Industrial Strategy, it is clear that SME business is strong, and isn’t going anywhere, in a hurry.

  • There were a record 5.7 million private sector businesses at the start of 2017.
  • This is an increase of 197,000 since 2016, and 2.2 million more than in 2000.
  • The number of employing businesses increased by 41,000 (+3%) since 2016, and the number of non-employing businesses by 155,000 (+4%).
  • Small businesses accounted for 99.3% of all private sector businesses at the start of 2017 and 99.9% were small or medium-sized (SMEs).
  • Total employment in SMEs was 16.1 million; 60% of all private sector employment in the UK.
  • The combined annual turnover of SMEs was £1.9 trillion, 51% of all private sector turnover in the UK.

And while we’re optimistic about the strength that is represented by this massive Brittelstand, one cannot ignore the reality that as much as they’re poised for growth, SMEs are also at great risk of some pretty catastrophic failures, that’s if they don’t have their houses in order.

Poor financial management, insufficient qualification and skill employed to manage critical business operations, lack of specialist expertise, poor reputation management, insufficient supply chain management, overlooking critical risk areas like government compliance and intellectual property, are all just a few of the challenges that SMEs face today – many of which are completely avoidable, with the right governance structure in place.

Why Corporate Governance?

It’s easy to assume that as a leader of your SME business, the word Corporate Governance doesn’t yet apply to your business. After all, isn’t that what the bigger players do? The listed ones?

Nope. 

Although under no obligation to have a Corporate Governance structure in place, many SMEs are realising the true value of an effective structure that is in place to manage and control the strategic direction of a growing business, and all the processes that support it. For many owner-founded businesses, the line between ownership and management can often be blurred, and it’s then that SMEs take the decision to bring in some impartial, strategically-growth focussed management that reduce conflict, mitigate risk and often provide enhanced access to credit opportunities.

Corporate Governance as your future-proofing tool.

Estelle Clark, of the Chartered Quality Institute, believes that size doesn’t matter, when it comes to establishing a good governance structure within your business. “Governance is about making sure you comply with the rules that mean you can be in business and you can articulate what you are trying to achieve, not only to your investors but also your customers, your supply chain, your staff or your community,” she says. “That is as relevant for a company of five people as it is for 5,000.” And when you realise that SMEs now account for 99% of the UK’s 5.5 million private businesses, coupled to the fact that many rely on each other through myriad supply chains, establishing operational infrastructure that strengthens your business from the inside-out, is critical in planning for the future.

We’ve often spoken about developing business agility – the ability to change with the flow of the economy and customer demand. And future-proofing your business is just another way that your business positions itself for an agile future. The introduction of the recent GDPR legislation is just one example that our world is becoming even more data-driven. And with data risks comes the need for data security. A solid corporate governance structure is a just another reinforcement that protects your business, it’s assets, and often it’s people, from risk – even if you’re not entirely sure what that risk looks like, just yet.

Where to start?

We understand that traditionally, corporate governance frameworks have been developed with large, listed companies primarily in mind, posing a huge challenge for SMEs who want to get started on securing their future. We also realise that for many SMEs, you’ll be asking questions such as:

  • How are company boards and independent Non-Executive Directors supposed to work?
  • Where do I find high-quality NEDs that would be interested in my business?
  • This is probably going to cost me – so how do I guarantee that my business will benefit from the cost-savings raised through the new corporate governance standards, through, for example, appointing a NED?
  • How urgent is this for my business, really, when I have other pressing business issues like managing cash flow, recruiting the right workforce etc?

Your first port of call should be a conversation. With us. We can help you identify your business need and the standardisation that would be required within your business, we will chat through any cost concerns you may have and help you understand the extent of any (and all) changes that would be required for your business.  We’ve worked with corporate governance structures in all types of businesses, and in many types of industries, and we’d love to help you future-proof your business, and get it focussed on sustainable, profitable growth – for the long-run.


Speak to us today


 

2018-06-05T09:05:56+00:00June 5th, 2018|News, SME Growth|Comments Off on Building a sustainable SME business through effective Corporate Governance