Monahans’ South-West Market Research Report: How are micro businesses faring?

As the south-west’s largest chartered accountancy and advisory firm, Monahans serves businesses of a wide range of sizes which operate across multiple sectors.

To ensure that the service we offer continues to fit the needs of our clients, we are always trying to find ways to take the temperature of market sentiment and understand the challenges businesses of all sizes face. As part of these efforts, we commissioned a survey of management teams, senior executives, and business owners at more than 300 micro, small, medium and medium/large-scale enterprises throughout the region, to gauge how businesses in the region have been faring over the last year.

At Monahans many of our clients fall into the SME size category, but we also work with a number of micro businesses, which we know face a unique set of challenges, particularly due to their lack of margins and resources.

Micro businesses have 10 or fewer employees and a turnover of less than £1.8 million, but their contribution to the UK economy, far outweighs their size. In 2023, there were an estimated 1,177,335 micro businesses, employing 4,288,000 people and contributing £592,131 million to the UK economy.

We know that behind many of these businesses are hardworking individuals and teams who may be facing issues that larger businesses do not, which is why we tailor our services to the unique needs and ambitions of each individual business that we work with.

So what challenges are micro businesses facing and how does this compare to businesses of different sizes?

Feeling the pinch
The last 12 months have been particularly challenging, for businesses of all sizes, with many batting with rising inflation and increased operational costs, and a reduction in spending due to interest rates climbing above 5%.

That said, micro businesses seem to have been particularly impacted. Micro businesses were the most likely to say that their business is in a worse position than it was 12 months ago – with 34% reporting this to be the case, compared with just 22% of those from medium businesses saying the same.

When it came to turnover, more micro businesses reported a decrease than all other business sizes – with 30% reporting a decrease. Only half of that figure said the same as small (16%), medium (16%) and med/large (14%) businesses.

When asked to rate the buoyancy of the market out of ten (one being very poor and ten being extremely good), micro businesses gave an average score of 5.9 – the lowest of all business sizes.

The challenge of generating new business
Whilst all businesses are facing the consequences of rising costs, medium to large businesses seem to be have been the most impacted by increased energy prices over the last 12 months, whilst generating new business has been a significantly larger challenge for micro businesses – 38% experienced this issue – higher than all other surveyed business sizes.

Looking ahead to the next six months, businesses of all sizes envisaged inflation/rising operational costs as being the biggest challenge on the horizon, however generating new business and cashflow were also rated as top concerns for micro and small businesses.

Not all doom and gloom
Despite a challenging 12 months, micro businesses have been the best able to retain and recruit staff – with only 9% reporting making redundancies in the 12 months, the lowest of all businesses, and a positively low figure, particularly when compared with 45% of med/large businesses who did the same.

Whilst Med/large businesses were most likely to believe that the general election will improve market conditions, almost a third (28%) of micro businesses were also optimistic that the election would bring improvements.

With Labour’s new government, micro businesses will likely be hoping to see policies and funding aimed at alleviating their unique challenges and helping them to weather the storm of navigating fluctuating market conditions.

In the meantime, business advisors and accountants will be on hand to help. Whilst unpredictability and uncertainty will always be part of running a business, at Monahans we help businesses to concentrate on controlling the controllables.

Our goal is to take some of the weight off business-owners’ shoulders, so that they can concentrate on running their businesses. Whether that be through offering sound business advice or supporting with cashflow management, recruitment, payroll or financial planning, we are here to help them reach their goals.

If you are looking for a team of experts to help you achieve long-term growth, get in touch with the team today.

To download the full report click here.

Clare Bowen