What makes a small business succeed or fail?

04 December 2015 -

New CMI research reveals management development is key to SME survival

Matt Scott

The recession and property crash hit Northern Ireland hard. House prices halved, decimating buyer numbers and shattering the construction sector. The 112-year-old family house-building business of David Law CMgr, WJ Law, was in the eye of the storm.

After a hard few years, in 2012 Law saw signs that customers were returning and that there were opportunities for growth and land acquisition. But the company lacked the resources to buy land, and the climate for bank lending was non-existent. The business needed equity capital.

To add credibility to WJ Law, and build his profile as executive chairman, Law did an MBA at Ulster Business School. The decision was transformational.

“Studying at UBS and repositioning the business has been highly valuable,” Law reflects. “The credibility and the knowledge that I derived were central to the diligence process of coming together with our [equity] partner.” His company now is “lean, customer-focused, outward-looking, collaborative and once again profitable,” he says.

Law is a success story, but many small businesses don’t recognise the edge management development can give them. Research from CMI reveals that 44% of all SMEs fail within three years, due to poor management and leadership (incompetence and bad management caused 56% of failures).

Sadly, SMEs are less than half as likely as large businesses to offer management training – 41% vs 89%. Their biggest concerns are the time and cost involved.

To encourage SME managers to take management development seriously, and to provide navigational tools to find the best education partner, CMI, the Chartered Association of Business Schools (CABS) and The Supper Club launched the Growing Your Small Business (GYSB) campaign.

Using Office of National Statistics data, GYSB research found that south-west England was the best region for training managers, with 46% of SMEs offering training for their leaders during 2013. (This compares to a national average of 42%, while only 39% of businesses in Northern Ireland offer such support – the lowest in the UK.)

As a result, the South West has the highest level of startup survival across the UK. Of all the businesses founded in the region in 2011, 59% were still in business three years later.

CMI chief executive Ann Francke called on small businesses to make the most of the support on offer. “There is an array of programmes available in business schools, many of them low-cost and easily accessed. Please take advantage of them; look to your business school as a source of resources and information.”

Anne Kiem, chief executive of CABS, said that the business support landscape must be made more navigable and “SMEs must be made aware that there is an open door to a range of services, from short programmes to MBAs, from startup incubators to growth programmes, and from work placements to the new Chartered Manager Degree Apprenticeships”.

Karen Bradley is Conservative MP for Staffordshire Moorlands, where a third of the land is covered by the Peak District National Park and there is a low unemployment rate. Speaking to Professional Manager at the GYSB launch, Bradley said: “It is great when you see businesses that have the right product in the right place with the right people and the right leadership, and they are making something of themselves. They are creating large businesses of the future.”

To read the full Growing your Small Business report and explore the heatmap, which identifies appropriate local business school support, visit www.managers.org.uk/growingSMEs or follow #growingSMEs on Twitter.

This article was first published in the Autumn edition of Professional Manager