SMEs increasingly adopting flexible business models

With the current economic and political environment, the UK continues to face a volatile market. To keep up, small businesses owners have been forced to become more flexible, creating a new business model in the process.

As explains, it is called “balloon business”, as companies contract and expand depending on market pressures. And, according to new research by Direct Line for Business, SMEs in the UK are increasingly adopting such flexible business models in order to deal with fluctuating customer demand.

Discussing the research, P2P Finance News reported that 74% of SME decision makers have set up businesses in a way that means they can scale up or down without impacting their overall viability. This means that around three million small firms are operating as a balloon business.

Scaling up and down of business includes increasing and reducing staffing levels, as well as the physical location of the office.

Half of SMEs and a third of micro-enterprises revealed that they fluctuate their staffing levels throughout the year, making use of gig and on-demand workers to make the process easier. A tenth of respondents admitted plans to increase their headcount over the next 12 months.

These companies are also taking a shorter-term outlook when considering premises and property, taking advantage of temporary or pop-up locations and short-term leases.

Speaking to P2P Finance News, managing director at Direct Line for Business, Jazz Gakhal, said: “Traditionally business growth has been viewed as a linear process, but small companies are now incredibly agile, hiring contractors to meet demand and taking advantage of short term leases to test the landscape and expand their footprint.

“By adopting flexible working practices, they can quickly scale up or down their operations without putting the company’s survival at risk.”

A lack of consistent revenue throughout the year was also highlighted by SMEs, with significant peaks and troughs experienced during the 12 months. To manage these pressures, many are looking to diversify their offerings by exploring new areas. According to the research, one in six have plans to offer a new product or service within the next year.

Growth Street chief executive, Greg Carter, believes that businesses need access to flexible financing. He added: “It’s no surprise that many of Britain’s resourceful business owners set up their businesses to be agile and able to respond to changing demand throughout the year.

“What businesses desperately need, though, is for financial services providers to adapt to businesses’ growth plans by delivering truly flexible finance.”

Director of Kingston University’s Small Business Research Centre, Robert Blackburn, told that it is their agility and the ability of SMEs “to respond quickly to market opportunities and threats that enables them to survive and thrive.”

While many of today’s SMEs are adopting flexible business models in order to keep up with the volatile market, they still require expert financial advice, for their business and in their personal life, if they wish to ride out the peaks and troughs brought on by today’s challenging environment.

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