In recent times, trading conditions have proved tough for many small and medium-sized enterprises (SMEs). As national chains have taken over the UK's high streets, offering greater product choice and increased value for money, many SMEs have had to work hard to keep their doors open. Independent retailers, manufacturers and service providers have all struggled when the 'big boys' move in on their patch and the recession has only exacerbated difficulties they face.
But at the same time, company formation rates are continuing to rise in the UK. New, ambitious entrepreneurs are setting up in business for the first time, keen to test the waters of self-employment. The government has repeatedly expressed its desire to see increased activity in the SME sector, and has reduced corporation tax, made rate relief automatic and secured a lending agreement with the major banks in order to stimulate activity. But what can start-up founders do to ensure their new enterprise is able to compete effectively, grow and thrive? The business model adopted and the owner's attitude towards IT may be seen as key influences.
While independent retailers may struggle to command the high street any longer, there are still significant opportunities to tap into consumer markets. Particularly online, where the rise of online business and e-commerce has created a multi-million pound industry, agile and flexible firms may have an advantage. Faster broadband connections and the rise of cloud computing have given SMEs the opportunity to compete on an even keel with their larger rivals - they can access advanced IT tools at a fraction of the outlay required a decade ago. With location making little difference to companies conducting their business online, firms with a strong product, a touch of marketing panache and a commitment to great customer service can quickly develop a wide and varied consumer base.
Online giants such as eBay and Amazon have grown from relatively humble beginnings to establish global empires. The rapid rise of the search and social media markets has also demonstrated how quickly SMEs can expand over the internet if they have a single, great idea. Hosted services have levelled the playing field for new companies - meaning they do not need to spend thousands of pounds setting up their own data centres - and the low overheads associated with small, home-based businesses mean owners can quickly enter into profit.
SMEs do not need to trade online to derive benefits from IT - it has various other uses, such as helping small businesses to manage finances more effectively, conduct human resources tasks, advertise their services with minimal outlay and remain in constant communication with their customers. And in the 21st century world of business, having a website is almost a pre-requisite for companies wishing to attract new customers. Traditional companies with a successful offline trading model can use technology to speed admin processes up, or simply portray a more professional image to the public.
A recent study conducted by Cisco suggested that SME owners fully recognise the importance of IT to their businesses. The majority of survey respondents said companies stand a greater chance of succeeding if they embrace technology solutions. Of those surveyed, 55 per cent of small business owners said they were planning to invest in IT and networking infrastructure in 2011, while 35 per cent plan to spend on video conferencing and multimedia communication. Cloud computing was on the immediate agenda for 25 per cent, while a quarter of businesses said they would look to use open-source solutions to improve the way they work.
In addition, interviewees said that a willingness to connect digitally with their audience is a characteristic of a successful enterprise. Some 56 per cent of owners said they spent time monitoring what customers are saying about them online, while 49 per cent use networking websites to support sales and marketing activity. Establishing relationships with customers in cyberspace is clearly seen as being important, particularly with an increasing number of small enterprises trading exclusively over the internet to reduce costs and maximise efficiencies.
The adoption of IT solutions will not transform a struggling business overnight - it is the companies' business model and quality of product and service which serves as the main determinant of its ultimate success. But IT tools have opened new doors for UK SMEs, which are badly needed as larger enterprises continue to tighten their stranglehold on consumer spending. Small businesses can establish a niche for themselves over the internet, without the cost and risks associated with opening a physical shop, office or factory. Other small companies, who have a steady customer base, can use IT to drive extra efficiencies and ensure they keep up with their rivals. Both in terms of creating new businesses and keeping others going through difficult times, IT has a vitally important role to play.