The Small Business Efficiency Index (SBEI) finds that SMEs across manufacturing, business services, wholesale and logistics with above average levels of operational efficiency – based on 17 different operational functions – not only have greater productivity levels but are also considerably more successful in terms of sales growth and more optimistic about their future development. Time management plays a key part in this, as those SMEs that manage their time well are a fifth more likely to clock up higher growth margins than those that don't.
Manufacturing has the highest proportion (40%) of firms that grew their sales turnover by more than 10% in the last year, and more firms in manufacturing (54%) than in the other sectors stated that they were operating at above average efficiency. The sector also emerges as the strongest-performing in terms of capacity, with one-fifth at full capacity and over half (54%) at above 90% capacity. SME manufacturers also made up the highest proportion of any sector surveyed who rated efficient time management as being of 'considerable' importance to their business capacity performance.
The research suggests that better operational efficiency and capacity usage may be linked to a greater penetration of advanced technology in this industry, in particular cloud technology. More manufacturing businesses (27%) than their peers in the other sectors use cloud software to manage financial and business processes (professional services: 19%; wholesale and distribution: 13%). What is more, among the manufacturers that achieved the highest growth during the last financial year (over 100% or higher), more than half were using cloud-based business and finance software.
Not surprisingly, more SMEs in manufacturing than elsewhere are expecting to grow 'considerably' next year. Nearly a third (32%) were positive about their prospects next year, compared to only 23% in wholesale and distribution and 20% in professional services.
However, manufacturing also has the highest proportion of companies where sales fell (12%), and the largest share of firms operating below three-quarters and half capacity.
"These findings come on the back of recent Government statistics showing the vast majority (68%) of the UK's 4.9 million SMEs set out to grow their businesses last year, but only 13% succeeded in doing so to any real extent," said Dr Rob Baldock, Principal Researcher at CEEDR."The manufacturing sector, with its polarised distribution, is a case in point. Better time management and automation of business and financial management through technology – in particular Cloud solution - are of considerable importance in increasing performance capacity and growth. But this is easier said than done for the SMEs we surveyed."
Although fear over the costs involved in introducing change is a barrier among SMEs who are performing less well, the report states that proportionally a far greater barrier lies in the fact that many (36%) lack the time to consider improvements and do not know where to find appropriate help and advice to address their problems.
Lucy Fox, General Manager, Cloud Solutions at Exact UK, said: "What this research shows is that the majority of manufacturing SMEs are focused on growth and many working at full or near capacity to achieve that, but there is also a significant share of underperforming companies."
"It's also clear that one quick way for small businesses to make immediate operational efficiencies is to invest in cloud and mobile technologies. What's more, these businesses are also experiencing better growth performance."
"While there is plenty of financial support being offered to SME businesses through growth accelerator funds and Government grants, more needs to be done to help support them in other ways, given many are just too busy to do anything about it," she added. "Time is one of the most valuable commodities SMEs have, and it needs to be invested wisely."
