Small and Medium-Sized Enterprises (SMEs) in the UK are optimistic and ambitious about the future. And new research shows that crowdfunding is increasingly attractive to them to remain agile and growly quickly. But is it a sustainable alternative to conventional methods?
On behalf of Moore Barlow, specialist research agency Censuswide surveyed 250 UK adults. All of them hold a C-suite-level position, earn £200k or more a year, and have capital assets worth at least £2m. The survey asked respondents to answer questions about their personal wealth and family status. The results were quite illustrative.
Despite the negative impact of the pandemic on business, SMEs are optimistic about the opportunities in the post-pandemic era and ambitious about the potential for future growth. But opinion varies as to what that growth means and the ways to achieve it.
Growing Out of the Pandemic
Emerging from the pandemic, SMEs in the UK are looking for a way to fuel their growth in the future. And crowdfunding is seen as an increasingly attractive option by many of them.
According to a survey of UK business leaders conducted by the law firm Moore Barlow, SMEs are more likely to choose non-traditional ways of accessing capital such as crowdfunding (32%) or offering investment opportunities to employees (30%), than they are to seek debt finance (26%), initiate a management buy-out (26%), or seek venture capital or private equity investment (28%).
Only one of the 250 C-suite executives and business owners polled said they intend to access some form of external investment in the next 12 months.
Interestingly, the research found that investing in innovation to develop new products and services (14%) and margin growth through improving pricing (12%) are the two most cited primary growth strategies.
At the other end of the scale, buy-and-build (9%) and driving UK expansion (6%) were the least popular strategies for delivering growth.
But what is driving this pattern shift towards non-traditional investment sources?
The established mechanisms for accessing funding have stood the test of time for a reason…
Partner, Moore Barlow
Quick Investment Is Seen as the Key to Agility
Jeremy Over, partner in Moore Barlow’s corporate team, said: “SMEs are still ambitious despite the negative impact of the pandemic on many. The shift away from traditional forms of investment is because of many reasons – firms that want to be agile are concerned about the bureaucracy involved with borrowing from the bank, or fear a tougher negotiation and loss of independence when taking venture capital or private equity backing.
“While crowdfunding does offer an antidote to some of these concerns, I would urge business leaders to take a step back, consult their advisors, and really think about whether this is the right option for them. The established mechanisms for accessing funding have stood the test of time for a reason and, even if they are sometimes harder to put in place, normally offer a better-structured and more resilient long-term option than faster ways of accessing capital.”
Protecting What Matters Most
Less than a third of the business leaders questioned (31%) plan to invest in their business across the next 12 months order to drive future growth. Of those businesses, investment in people to upskill the workforce (32%), improving employee benefits (29%), driving graduate recruitment (28%) and rethinking (29%) or expanding (29%) office space were the clear spending priorities.
Jeremy commented: “The real positive I take from our research is that businesses are looking to put their money where it matters – their offering to customers and their people. As they tackle the strong economic headwinds lying ahead, it’s vital for SMEs to have the right legal and financial structures in place to protect these important assets.”
In short, this is the best time to grow, diversify, innovate and transform. But, whether crowdfunding is a sustainable alternative to the more conventional methods remains to be seen. In the meanwhile, SMEs will do well to engage with caution, investing in high-value areas, and always carefully protect their most valuable assets.