SMEs adopting flexible models to cope with demand fluctuations

ew research has identified a new trend dubbed as Balloon Businesses, firms which do not follow a continuous growth trajectory but instead expand and contract throughout the year to keep up with market pressures.

The trend applies to almost three million UK businesses, according to researchers, with nearly half of SMEs saying their headcount fluctuates throughout the year, followed by a third of micro businesses and around a quarter of sole traders.

The pattern also seemingly applies to real estate, with a third of SMEs saying the number of locations they operate from changed between the second half of 2017 and 2018, as businesses increasingly take advantage of short-term leases and pop-up locations.

Decision makers identify June as their most profitable month, while January is traditionally the month they record their lowest revenues. The research, from Direct Line, also showed that one in 10 SMEs plan to increase their headcount in the coming year and that nearly two thirds anticipate their revenue will grow in the next 12 months, by an average of 11 per cent.

Professor Robert Blackburn, director at the Small Business Research Centre, Kingston University, said: “Today’s small firms operate in challenging environments but it is their agility and their ability to respond quickly to market opportunities and threats, that enables them to survive and thrive. Hence, it is important that small firms are able to adjust their costs according to their requirements, rather than be burdened with a fixed outlay. Driving down the so-called fixed costs of the business is one way of achieving this.”

Jazz Gakhal, of Direct Line, said: “Traditionally, business growth has been viewed as a linear process, but small companies are now incredibly agile.”