Now that the dust has settled, what does the March budget 2024 mean for small and medium-sized businesses in the UK, and how do the business owners feel about it?
From the opinions we’ve canvassed, the response is a bit “meh”!
The positive headlines
There are headline-grabbing takeaways from the March budget 2024 such as the increase in the VAT threshold from £85,000 to £90,000, the changes to self-employed National Insurance Contributions from 8% to 6%, and HMRC’s guidance on the tax deductability for sole traders and the self-employed with training.
Additionally, the government has been talking about the ‘green shoots’ of economic recovery with taxation levels down, inflation rates down, and energy bills starting to drop as signs of things improving.
All reasons to be optimistic for SME business owners – right? Perhaps not…
The experience for SME business owners
Sadly it isn’t as simple as the government may like to paint it, nor does it reflect the day-to-day reality for many SME business owners. The truth is that the market is challenging for many companies as well as for individuals struggling with the cost of living.
Firstly, many companies are still suffering the effects of the pandemic and are busy building their businesses back up to where they were before Covid hit. Some are still pivoting to a slightly different type of business post-pandemic, and in many cases paying back what was spent from their reserve funds again. In short, lots of companies have less financial resilience than they had before, and the market is still evolving to a new normal.
Secondly, the headlines are a function of either media spin or governmental spin.
For example, the VAT threshold level has been the same since 2017, so hasn’t accounted for inflation and the like for many years. The uplift to £90,000 to register for VAT is not a kindness, but a partial correction for failure to adjust over several years.
Additionally, allowances for things such as the tax-free level allowed on dividends have gone down in the last successive years and will not be going back up any time soon!
Together, all of this means that company owners are experiencing a cut to their allowance as a result of inflation and government policy.
Add into this the new sliding scale for corporation tax that came into force on 1st April 2023, and the picture starts looking a lot less rosy for limited company owners too. These are not insignificant issues!
Thirdly, official figures show that the UK was in recession for the past two quarters. A shallow recession and one we may be out of already (subject to confirmation in the imminent economic reports) but the fact remains that quarter 4 of 2023 saw the economy shrink for the second successive quarter.
In short, the challenges SMEs face are still very much there from the of cost living crisis, inflation, and broader supply chain issues.
So, why the “meh” response from business owners to the March budget in 2024?
The ambition to get on and thrive
The official statistics of the UK recession didn’t tell business owners anything they didn’t already know. Times are tough but after year-on-year of various challenges, we are seeing the ambition, drive, and commitment from SME business owners to crack on despite the challenges.
There is almost a conditioned response for company owners from several years of successive major challenges to simply “suck it up” and get on with the job at hand regardless.
The SME entrepreneurial spirit is alive and kicking!
However, as a counter to the ‘stiff upper lip’ mentality, the facts tell us that the amount of business failure in the UK has been increasing year on year since 2017. It is a stark fact that 46% of businesses in the South East have closed their doors. Other regions were considerably higher!
The ambition of owners is there, but the reality remains that many SMEs are fighting for survival and only a few are thriving in these market conditions. The March budget 2024 will do little to change that story.
How SMEs can thrive in today’s economic climate
We’ve written before about how SMEs can handle and best react to a tough economic climate but there are some further lessons the wider economic picture and the rate of business failure in the UK can provide.
1. Understand your numbers
There are some crucial financial statements that you should set up, update, and review in your business regularly – these include cash flow forecasts, budgets, and sales projections.
These documents can help you stay better informed on where your business is at now, and what is going to be coming up in the future.
Armed with this information you can take positive and proactive steps to resolve challenges before they arrive and get yourself into a stronger position or push on with confidence!
When we talk about the numbers though we don’t just mean your financial records – there are also your business’s other key performance indicators; its KPIs too.
Some KPIs will come from within the financial records mentioned above, but others such as lead flow and source, conversion rate, average sale value, operating efficiency need to be calculated or drawn from elsewhere. Regularly tracking and taking action based on what they are telling you will help unveil your business’ potential.
2. Ask for the help you need
There is little point in knowing the KPIs of your business if you aren’t going to do anything about them.
It’s a bit like seeing that you have a mountain to climb in bad weather conditions but not adjusting your clothing, plan, or equipment to take account of it. The purpose of gathering information and interpreting it is to enable changes to behaviour and strategy.
You sensibly have two options in the metaphoric scenario. The first is to guess at the clothing and kit required to take you up the mountain, and trial ‘finger in the air’ strategies, to just “see how it goes”. By taking that approach, you’ll likely need a few attempts before you figure out the right combination, or suffer the consequences of inadequate preparation and have to give up in a battered and bruised state from the experience it delivers!
Alternatively, you can stop and ask for some expert advice and gather the right information to be better informed before setting off up the mountain! By doing so, you are far more likely to succeed, gain the benefit of others’ experience in how they successfully have done it before, and enjoy far fewer bumps, bruises, and wasted efforts.
In the context of your business, the second option is also the better one. Stop and ask for expert, objective guidance, support, and education…before you suffer unnecessary pain and misery!
3. Carefully plan how you are going to increase your profit
Connected to the previous two points is a need to understand how profit flows through your business, and then develop the strategies, plans, and tactics needed to increase it.
When we talk about profit, often SME business owners think about the margin on a sale but that is just one element in a much bigger picture of how profit flows through your business.
The whole ecosystem of profit needs to work together – if one part fails or isn’t pulling its weight, your efforts elsewhere will lead to very little.
From generating initial leads (whether that be brand new customers, repeat business to referrals), through to the lead progress rate, your sales conversion rates, sales order value, sales order frequency, gross margins to your fixed costs.
4. Expect more changes!
We are in an election year, so it’s all to play for with what will be implemented and promised. If there is a change of government, then there is potential for even more to change in future budget announcements.
The more robust your planning is, the stronger your resilience to change will be.
The closer you are to the KPIs in your business, the quicker you can adapt to the opportunities and challenges these wider economic conditions create. This gives you a competitive advantage and will help you climb that mountain faster, rather than being blown off course!
Talk to UK Growth Coach if you want to thrive!
Don’t be too proud to ask for help or to admit where you need some guidance.
The first port of call is to book yourself a spot at one of our forthcoming publicly accessible business owner education seminars. You can see what we are about, gain confidence in our expertise, and reassure yourself that a more in depth 1:2:1 conversation is going to be valuable to you.
These seminars are designed to educate business owners (like you!) on everything from business strategy to marketing, HR, IT, software, accountancy, the law, telecoms, and more.
Within the space of just half a day, you’ll have received advice from a range of experts and given yourself the time and headspace to work on your business, rather than just in it.
A limited number of complimentary spaces are available at these events, so do get in touch. Otherwise, book directly and all proceeds go to The Chaseley Trust.
- Friday 3rd May, Lingfield Park Marriott Hotel, 8.30am – 1pm
- Friday 24th May, Mid Sussex Golf Club, Ditchling, 8.30am – 1pm
- Friday 14th June, The View Hotel, Eastbourne, 8.30am – 1pm.
