Quarter of SMEs wait for crisis to hit before bringing in the experts

  • 24 per cent of SMEs only hired external advisers when facing a crisis
  • Over a fifth (22 per cent) have never hired a professional adviser to help their business
  • Yet, 95 per cent of SMEs who have hired professionals said they had had a positive impact on their business, by helping to increase revenue (65 per cent), improve business infrastructure (66 per cent) and look more professional (74 per cent)
  • In the last 10 years there has been an 83 per cent increase in consultants across the UK, from 1.1 million in 2009 to 2 million in 2019

New research from Direct Line for Business1 reveals SMEs may be waiting too long before calling in experts to help their business. A quarter (24 per cent) of SMEs have left it until they hit a crisis before hiring a professional adviser to help them, either because they were already experiencing issues (11 per cent), were in the midst of a crisis that could not be remedied internally (nine per cent) or because the business was actually losing money (seven per cent).

Over a fifth (22 per cent) of SMEs have not hired any professional adviser to help their business, whether that be a lawyer, accountant or IT expert. The main reason for not hiring advisers is cost, cited by two fifths (40 per cent) of SMEs, although for others it is because they learnt how to do that particular skill themselves (36 per cent) or because they believed they had enough skills and knowledge to not require any external guidance (35 per cent).

Of those who have brought in external help, just a quarter (25 per cent) did so before commencing trading. The average time taken to seek advice for a SME is one year and six months, although it varies depending on type of adviser. SMEs wait around one year, eight months to hire a management consultant but just one year five months to hire a lawyer, accountant or IT expert.

Karneet Chowdhury, Business Manager for Office and Professionals at Direct Line for Business said: “SMEs are often expected to be a ‘jack of all trades’ but it’s very difficult for a small or micro business to have enough knowledge and experience of law, accountancy, IT and/or HR to be able to manage these aspects of their business themselves. While cost control is vital for SMEs, sometimes the DIY approach may be a false economy and in fact cause more problems. Business owners should work out what they can realistically do themselves and what they need expert help with and budget accordingly. Fines for non-compliance with regulation or law could be substantially higher than the cost of an adviser.”

Those SMEs who have not hired experts may wish to do so as the overwhelming majority (95 per cent) of those who have said doing so had had a positive impact on their business. External professional advisers have helped SMEs

• increase revenue (65 per cent),
• improve business infrastructure (66 per cent) and
• look more professional to their customers and peers (74 per cent).

The advisers most commonly hired by SMEs are accountants and IT or web experts. Two thirds (66 per cent) of SMEs have hired accountants and over half (55 per cent) hired IT or web experts, followed by lawyers (52 per cent), designers (43 per cent) and HR experts (42 per cent). The least common professionals employed are project managers (38 per cent) and management consultants (39 per cent).

The number of consultancy related roles has risen rapidly over the past decade, usually reflecting the above average salary increases. Separate analysis2 reveals that around one in 11 (nine per cent) people are currently employed in a specialist consultancy-related profession, which accounts for around two million workers. This is a significant 83 per cent increase since 2009, when there were around 1.1 million in the industry, accounting for just six per cent of workers.

The sales and marketing industry in particular has experienced a meteoric rise, with nearly 550,000 more professionals working in this space since 2009 and a 34 per cent increase in median salary over the decade. Other sectors which have seen a rise in median salary since 2009 are media-based professionals (up 17 per cent), IT and telecommunications-based professionals (up 13 per cent), design-based consultants and legal professionals (both up eight per cent).

Emma Jones, founder Enterprise Nation said: “We have seen for ourselves that businesses who access advice often grow faster than firms that don't, and from talking to business owners we know it can often be a result of not knowing which advisers to trust and how much to pay for the advice. Our suggestion would be to use business forums to get recommendations or find a support group like Enterprise Nation who can open up a network of trusted advisers.”

Sector insight

SMEs working in financial services are most likely to call in expert help, no doubt due to the strict rules and regulations faced by financial firms. The greatest proportion of financial services SMEs use lawyers, accountants, management consultants, HR experts, project managers and designers to help their business of any sector. Engineering SMEs, however, are most likely to employ marketing and PR consultants of any industry.
SMEs cite the main benefit of using advisers as ensuring compliance with regulations. SMEs working in the engineering, healthcare, IT and web design and retail and wholesale industries all listed complying with regulations as the key benefit to their business of bringing in expert help. Financial services businesses also listed this as a key benefit but equal in importance to improving the infrastructure of their business and making the business look more professional. Business management firms ranked compliance as equal in importance to expanding the company’s reach, while building and property businesses ranked the top benefit for external help as making the business look more professional.

Table one: Benefits for SMEs of using external advisers by sector

  Building/ property  Business management  Engineering  Financial services  Health  IT/ web design  Retail/ wholesale 
Increasing brand visibility with the public and media  68%  49%  48%  64%  65%  63%  67% 
Elevating employee satisfaction and wellbeing  60%  56%  48%  59%  50%  58%  47% 
Increasing revenue  69%  60%  64%  73%  55%  72%  80% 
Complying with regulations  86%  74%  76%  82%  80% 81%  86% 
Improving business infrastructure   69%  67%  64%  73%  55%  70%  67%
Improving confidence in business infrastructure  71%  72%  68%  73%  70%  84%  63% 
Making the business look more professional  74%  72%  68%  82%  80%  72%  82% 
Expanding the company’s reach  74%  60%  56%  68%  45%  67%  73% 

Source: Direct Line for Business 2019

Karneet Chowdhury added: “Clearly bringing in expert advice at the correct time makes economic sense and instils good practice within an organisation. It is vital that companies ensure that their expert help is appropriately insured for their line of work.”

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Notes to Editors

1 Research conducted by Opinium amongst 504 UK SME decision makers between 14th and 20th August 2019

Analysis of Annual Survey of Hours and Earnings (ASHE) report from the Office of National Statistics

For further information please contact:

Direct Line for Business

Unni Henry

Tel: 01903 636 149

Email: [email protected]

Direct Line for Business

Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone or on-line.

Direct Line for Business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Direct Line for Business and U K Insurance limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line for Business products or get a quote by calling 0345 301 4827 or visiting https://www.directlineforbusiness.co.uk