Small businesses push industries – and the economy – forward. At a time when legacy businesses are struggling to adapt to the changes, small to medium-sized enterprises (SMEs) are growing and becoming market disruptors with their innovative products and forward-thinking business models. Their ability to respond to new trends and tech developments while remaining agile and flexible sets them apart, but with Brexit looming, questions over the sustainability of SMEs and the challenges they face have emerged. The Drum together with Mailchimp held a panel to discuss the future opportunities available to SMEs.
The panel, moderated by The Drum associate editor, Sonoo Singh, included start-up Sarka London’s CEO and co-founder, Julie McKeen; founder of perfume start-up Vaunt London, Ryan Hall; PHD joint head of planning at media agency, Andrew McLean; and Mailchimp director of integrated marketing, Palmer Houchins.
Are SMEs planning for Brexit?
While the government oversees Brexit negotiations, businesses of all sizes have been left to figure out the next steps.
Hall from Vaunt London said that SMEs cannot let politics affect his business; as most growing businesses are prepared for market fluctuation. Of Vaunt – a self-funded venture – he said, “We’re very much a UK brand and definitely, London-centric. For the first phase of our business, we’ll be focused locally. Brexit will be Brexit; no-one in this room can do anything about it. When it happens - whenever that is - we'll just have to deal with it and roll on.”
Thoughts echoed Sarka’s McKeen who added that SMEs don’t have a choice but to think realistically about their prospects and plan for whatever the future might hold - and hence the entrepreneurial spirit that SMEs are so often associated with.
“There's a lot of opportunity in a downturn,” said Mailchimp’s Houchins. “It can be of course be very challenging. Let’s just take Mailchimp as an example; it was a side project for a long time.
“What we’re seeing with Brexit and changes to GDPR is a softness in the UK market. When we talk to entrepreneurs of small businesses, a lot of what we see is a wait-it-out approach; they’re reluctant to invest. There’s a lot of opportunity when things get tight because few marketers are ready or confident enough to make that leap, so the market’s not as competitive as you might think in these tough times.”
Houchins suggested that these seemingly unstable circumstances are ripe for entrepreneurs to strike.
The story of the pioneering Mailchimp is something most of us know - The business was founded in 2001 by two web- designers: Ben Chestnut and Dan Kurzius. In fact, it was a side project to their main web design consultation business named the Rocket Science Group. Chestnut decided to start a company that developed emails as a marketing channel for his customers for one main reason: the demand for such software. Often, their customers would ask how they could reach their own customers with ease, and the best solution was to use emails. Initially, he wanted to name the service Chimpmail, but the domain name was already taken so he settled for Mailchimp!
McLean from PHD, cited Audi (not quite a small or medium sized business) as an example of a brand acting continuing to spend when their competitors didn’t during 2009/2010. “If you base your business on what it’s going to be like next week, you’re always going to be micro-optimising and making everything more efficient for the imminent future,” he said. “But how can you be more effective in the long term? Brexit is going to happen no matter what, so having plans in place for it and considering outcomes for your business is crucial.”
SMEs’ marketing and investment challenges
However, despite thinking big and cultivating a risk-taking culture, SMEs have many challenges pitted against them, not least of finding the investment to get started.
“There’s a real challenge around alternative investment for funding small businesses,” said McKeen. While there are many tax breaks available to start-ups to enable them to stay nimble – sometimes unbeknownst to big businesses – she cited angel investors as a more sustainable and reliable long-term solution. She suggested SMEs “find angel investment with people who understand the business’ vision, so they can string it along as long as possible.” That way, marketers at growing businesses can focus on building a base for their business rather than getting side-tracked by financial milestones too early on.
Young businesses should focus on getting the right foundations in place from the start; concentrating on identifying and reaching customers, proving their concept, launching their product and pushing it out to market, agreed the panel. The temptation for a lot of SMEs starting out is to build a strong online presence, but as Hall admitted it’s a full-time job in itself, “which for businesses on tight purse strings shouldn’t be a priority.” McKeen added: “There’s no use spatting money on marketing because the powers that be say they need it.”
Adopting a more simplistic approach is critical, agreed the panellists. “Put simply, you have effectiveness and efficiency,” explained McLean. “If you’re a simple business, there are things that you do that are efficient short term, to help you to see an uptake in sales immediately. But sometimes more effective strategies take place over a much longer time frame which can be challenging because they’re harder to measure.”
Data and tech - the real friends to all businesses to help scale
Rather than relying on social listening, conversational or anecdotal evidence – as most SMEs do in the initial stages – data and technology can be a really useful tool for informing insights and working out how to target (and retarget) new and existing consumers, according to Houchins.
Larger businesses may have the capital to experiment a bit more with their tech investments but younger growing businesses need to be savvy about how they approach this and instead focus on the metrics.
He suggested SMEs look at their investment strategies. “When we invest lower in the funnel, we see good and short-term returns,” he said. “And it all seems very efficient. But a few months out, we wonder why that’s slowed down. It’s because we were investing top of the funnel.” Tackling this approach will help businesses to scale up more quickly further down the line.
“You need to know what you want to prove from early on; are you testing the message, the platform or the audience?” said McKeen. “Make sure your AB testing is really clear; that you’re testing apples with apples.” She suggested that whether it’s looking at spend, experimenting with budgets or using digital and data, an external opinion can guide SMEs through new terrain. Although McKeen warned that enlisting bigger outside expertise - such as the services of network ad agencies - comes with consequences for young businesses. Speaking from her personal experience, SMEs are likely to be side-lined if more important clients come along.
Redefining brand purpose is a useful – and indeed, essential – exercise for emerging SMEs, according to the panel. Whether the brand is launching something that doesn’t currently exist in the market, redefining a niche or speaking a different language to its competitors, its USP needs to be known.
“You need an incredibly shorthand way of telling a consumer why it exists,” said McLean, who suggested SMEs adopt a challenger brand mentality. “To articulate your purpose inherently puts you as a market disruptor,” he concluded. “It makes consumers understand the context in which your business exists, so you don’t need to spend a single pound on brand advertising, and it helps you to articulate your brand strategy for the next 20 years.”
The Drum, in partnership with Mailchimp, has launched A Guide for Growing Businesses to further explore some of the issues small-to-medium size enterprises (SMEs) face today when it comes to business growth.
To download the free digital version of The Drum's Guide for Growing Businesses complete the form below.