Research shows that small businesses in the UK often experience significant revenue fluctuations. Direct Line for Business finds that during certain months, it’s a normal experience for 1.6 million small businesses in this country to halve or double their revenue.
These kinds of fluctuations inevitably cause problems for small businesses in terms of maintaining appropriate staffing levels and being able to fulfil changing consumer demands.
How do revenue fluctuations affect small businesses?
As these revenue fluctuations are so significant in size, there are also challenges in maintaining and managing cash flow. Small businesses must be able to continually adapt to meet the challenges posed by wildly fluctuating revenue generation month by month.
More than a quarter of the 5.7 million small businesses in the UK are dealing with this fluctuation at any one time, showing the scale of the challenges facing the sector. And the way they manage varies.
How to manage revenue challenges
One way to deal with the changing income generated by a small business is to be flexible with employee numbers. Being able to quickly scale up or down as business dictates is a key part of small business success. For many there are periods of intense action, interspersed with slower months. This leads to the need for more or fewer staff to meet requirements.
Almost a quarter of small businesses have found themselves employing more people due to their rapid expansion. This can cause problems later down the line as demand drops, or the business needs change. As a result, the small businesses able to flexibly manage staffing levels, and understand the need for forward planning to predict the changing requirements from their consumers, are the ones that will succeed.
UK small business sector still growing
However, challenging these fluctuations can be, the UK SME industry is continuing on its upward trajectory. Over the past 12 months, more than half of small businesses report an increase in income, with 3% reporting revenue growth in excess of 50%.
There are now 2.7 million VAT registered SMEs in the UK, which represents a 23% growth. This is partly driven by the 25% increase in the launch of micro-businesses, which now number 2.4 million. Micro-businesses are defined as those employing fewer than ten people.
James Turner, Managing Director of Turner Little Limited says: “Small business operators and owners are some of the most adaptable, flexible and resilient business leaders in this country. Fluctuations in demand for services and in revenue are difficult challenges to overcome. However, UK SMEs continue to thrive, proving that these challenges are surmountable.
“If small businesses have the appropriate strategies, cover and policies in place, and are updating these as necessary, then they will be in a good position to deal with fluctuations. The ability to be flexible and adapt to changing conditions cannot be underestimated, particularly as the country awaits the outcome of Brexit.”
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.