Small businesses just got smaller. But they’re making a bigger impact than ever before. This year saw microbusinesses – firms with nine or fewer employees – outdoing bigger competitors in 12 of the UK’s largest growing sectors, including health, education and social work.
It’s a change in working patterns that’s impossible to ignore. The numbers are huge: there are now 5.2 million microbusinesses in the UK, employing around 8.4 million people. Compare that to the numbers working for the UK’s largest single employer, the NHS – just 1.3 million.
Even the Government has responded to the increased importance of this sector. Following the general election, Anna Soubry became the first-ever minister for Small Business, Industry and Enterprise – the role was previously known as Minister for Business and Enterprise.
And their growth is likely to bring huge benefits, according to Benedict Dellot, author of the RSA’s report on microbusinesses, The Second Age of Small: "Our research has shown that microbusinesses can thrive under the right conditions and provide far greater value to the UK economy than previously thought," he says.
So what's driving this trend? The RSA report says four factors are key: encouragement from Government; a positive view of entrepreneurship; the availability of technology making it easier to work from home and a trend for larger companies to outsource.
It’s easy to see the lifestyle advantages, too. A better work-life balance seems far more achievable when you’re setting your own hours. "Some do it to spend more quality time with their families, or at least be able do the school run some days," says Jason Kitcat, micro-business ambassador for Crunch Accounting.
And there’s a certain satisfaction using the skills and experience you’ve gained within a larger company without coming up against opposition from your boss. As a microbusiness, you can do it your way.
Of course, running a microbusiness isn’t all cosy offices at the bottom of the garden and days off whenever you fancy. Microbusinesses are far more vulnerable to cash-flow problems, for a start.
Recent research has found that a quarter of small businesses have come close to insolvency while waiting for payments.
And these bad payment practices are rife – research from the Institute of Directors has found 66 per cent of SMEs have experienced them.
Smaller businesses are also more likely to struggle to keep up with red tape – and its associated costs. The new auto-enrolment pensions scheme, for example, will cost a small business an average of £8,900 to set up. But a recent survey found that 40 per cent of small businesses thought it would be free.
Rich Preece, UK vice-president and managing director of Intuit, which carried out the survey, says: "Given that auto-enrolment will affect almost every person across the UK in some way, we were surprised to see how many micro-businesses are still unprepared for the legislation."
And don’t underestimate just how emotionally draining running a small business can be. Research from AXA PPP Healthcare found that 47 per cent of business owners said they felt stressed all or most of the time, with more than half saying that taking a holiday was more stressful than it was worth.
"Small business owners have to combine leading their business and securing its future, with ensuring the business-essential activities are also well managed," says Axa PPP Healthcare SME business director Glen Parkinson. "This degree of responsibility is therefore leading to longer working hours and higher levels of stress for many business owners."
But despite the stresses, the microbusiness trend looks set to continue. So here’s hoping that 2016 sees more recognition for these small but perfectly formed businesses from government and business, to help their influence and innovation continue to grow.