How Has the Pandemic Impacted SME Business Development? [STATISTICS]

Updated: Nov 11


Man putting up temporarily closed due to COVI-19 sign

Introduction


In March 2020, the COVID-19 pandemic significantly changed daily life for almost everyone across the world.


Due to these severe changes and restrictions, it was a struggle for many businesses to adapt, especially due to the impact on the financial climate that came as a result of the pandemic.


While many businesses suffered terrible fates due to the sudden changes, some thrived and expanded in this time of turmoil.


Now one year on from the first lockdown here in the UK, we wanted to take a deeper look into the pandemic, and how businesses from a range of sectors and backgrounds handled the challenges thrown their way, and exactly how successful they deemed their 2020 to have been.


So, we reached out to over 200 SMEs from across the UK, asking them to complete a short survey to understand how the pandemic impacted their SME business development.


Continue reading this article to see the data that we collected, what the data means, and how various industries have either struggled or prospered throughout this pandemic.


You can also take a look at the full infographic: 'How Has the Pandemic Impacted SME Business Development?'


The First Lockdown


How severely did the first Coronavirus lockdown impact your business development?


When the first full UK lockdown came into effect on 23rd March 2020, almost every non-essential business either closed or began working from home.


Straight from the get-go, this was a massive change that would have a serious impact on hundreds of thousands of businesses and the way that they operated.


We asked our survey audience how severely the first lockdown impacted their business development, and almost 49% said that it had an extreme impact, while just over 37% said it had a moderate impact on their business development.


Only 14.3% told us that the lockdown had no impact at all on their business development, meaning that 85.7% of our SME survey audience were impacted by the first lockdown.

Taking a closer look, we noticed that a large number of our respondents who said the first lockdown had an extreme impact, were from organisations whose business models relied heavily on in-person interaction e.g. training organisations.


With the rules on social distancing, the training industry ground to a halt, and while some organisations facilitated online learning and training, for many, this just wasn’t an option logistically or financially.


At the other end of the scale, a large portion of the 14.3% that said the first lockdown had no impact at all on their business development, came from the financial services industry, which of course saw a huge boom in business as almost every organisation looked for help to manage and conserve their funds to come out on the other side of the lockdown, intact.


One of our clients, which specialises in financial management software solutions, saw a 500% increase in inbound enquiries, and overall, tripled their revenue in the second quarter of 2020, compared to the first.

So, while many businesses struggled with the challenges brought by the first lockdown, some saw a significant surge in demand within their industry.


​How significant was the impact on your customer base?


We then asked our audience, how severe the impact was on their existing customer base.


42.9% of businesses said there was a very significant impact on their existing customer base, while 40% said that there wasn’t really any impact at all. So, while 60% of business saw some form of impact on their customer base, 40% managed to retain presumably all, if not the vast majority of their existing customers in the first lockdown.

Again with this result, the majority of those who saw a significant impact on their customer base were those in the industries that relied heavily on in-person interactions and struggled to transition their business model to suit the rules of the pandemic.

Those who saw very little or no impact at all were those in the IT already digitalised industries that had a suitable online infrastructure in place already, or those in the financial sectors that saw a boom in their businesses and need for their services.


What percentage of your pre-lockdown customers returned after the first lockdown?



So we know who faired well and who didn’t during the first lockdown, but which businesses and industries bounced back the quickest? And did these businesses see a large number of previous customers returning, or did they bounce back by targeting new business opportunities?


Over half of our survey audience (51.4%), said that between 81 – 100% of their pre-lockdown customers returned after the restrictions had been eased, with a further 25.7% saying that 61 – 80% of their previous customers returned.

This means over 75% of these businesses saw the majority of their previous customers resuming their use of their services or purchasing their products.


The remaining 22.9% of our audience, on the other hand, had less than 60% retention of their previous customers, meaning they needed to work even harder to bounce back from the impact of the first lockdown.


While most businesses saw a large percentage of their customers returning after lockdown, the businesses who saw fewer customers returning were those in the hardest-hit industries such as the previously mentioned events sectors and of course the organisations that supply into those sectors, for example, printing firms that provide promotional material such as flyers, brochures and business cards for events and exhibitions.


But one big part of the customer’s decision to resume their custom or partnership with an organisation was, of course, budget. With the financial situation that the pandemic has presented, consumers in the B2C and organisations in the B2B markets all had to cut back their spend to make it through the first lockdown.

This meant if they were purchasing a product or a service that they no longer needed due to the pandemic or wasn’t a necessity in their everyday personal or business life, they would’ve stopped using it. For many, their financial bounce back still hasn’t fully happened yet, and they are still recovering from the impact of 2020 while still dealing with the challenges the 2021 lockdown has presented.


After the first lockdown was lifted, what was the primary focus for your business?


After the rules of the first lockdown began to ease from the end of May 2020, many businesses were able to return to work and get back on their feet to recover some of their losses from the past two months of inactivity or limited operational functionality.


During this period, 57.1% of businesses made Marketing & Sales their biggest focus to try and recover their lost revenue and get their business back on track in terms of growth and development targets for the year.

37.1% of businesses focused primarily on their business operations, which were likely those businesses who weren’t heavily impacted by the lockdown or had retained the vast majority of their customers.


The other 5.7% of businesses focused on bringing in new staff or focusing on the training of existing staff to expand their workforce and improve their skills.

While a lot of businesses returned to work, with such a small percentage of organisations focusing on the training of staff, training providers that offer in-person training courses still found it difficult to bounce back from the lockdown with a limited capacity of their training centres being deemed safe, and many businesses still choosing to conduct training online to keep their workforce in a safer environment too.


Did you increase or decrease your Marketing/Sales budgets after the first lockdown was lifted?



Despite such a heavy focus on marketing and sales after the first lockdown, over 54% of businesses made no changes to their marketing or sales budgets; with even 14.3% of businesses saying that they had decreased their marketing and sales spend.

31.4% of businesses increased their budget after the first lockdown in efforts to regain their lost revenue and get their business back on track.

Have you made any drastic changes to your Marketing/Sales strategy due to the pandemic?

We asked our survey audience whether they had made any drastic changes to their marketing and sales strategies as a result of the pandemic, which came out at almost even split.

51.4% of businesses said they DID make drastic changes to their marketing and sales strategy while 48.6% said they kept things the same.

To find out more about what changes some business did make to their marketing strategy, we asked those you answered ‘Yes’ to detail some of the changes that were made.


As to be expected, one of the most common changes that almost every business made was shifting their focus to online platforms and digital marketing strategies to engage with the customers in the absence of direct face-to-face interactions.

One of the best examples of this is the takeover of Zoom in not just almost every business, but also in households across the world.


Due to social distancing measures, travelling and gathering for meetings with potential customers wasn’t just an ill-advised option, it was against the law! So businesses had to quickly adapt and use video-conferencing platforms such as Zoom, Skype, and Microsoft Teams to engage with customers and prospects online but still keeping the all-important touch of personal interaction.


With this shift in marketing behaviour as a result of the pandemic, a lot of businesses have realised that running meetings and events online cuts out a lot of the cost of in-person meetings and events, while also being more convenient and providing a similar quality of experience.


One of our survey respondents said, ‘I do not see we will ever return to the old ways and see us continuing to provide online content, such as live and pre-recorded presentations and arranging many more meetings as virtual, rather than physical.’

Several other respondents also said they had adjusted their markets to focus more on acquiring customers in different sectors, with these businesses wanting to widen their markets to reach more customers and focusing on sectors that were still purchasing and operating.


With one business simply saying that they had ‘Widened our market but narrowed our focus’.


Throughout the first lockdown, which of these did you struggle with the most?



One of the biggest impacts of the first lockdown was the shift in customer behaviour. With the uncertainty of their financial situations, both businesses and consumers became reluctant to part with their funds and invest in products and services.


As a result, customer acquisition became a serious challenge in March and April 2020. 57.1% of business said they struggled with customer acquisition the most. With 22.9% of businesses struggling with customer retention and 20% finding that they struggled with neither.

As restrictions began to ease and businesses started getting back on their feet buying behaviours of both businesses and consumers began to return to relative normality, but even now, twelve months and two further lockdowns later, buying habits still haven’t fully returned to normal and in some industries may be changed permanently.


The Second Lockdown


How severely did the second lockdown (Nov 2020) impact your business?


In November 2020, after a few months of what felt like almost regular life, we were thrust back into another lockdown as new case numbers and deaths from Coronavirus (COVID-19) began to rise once again.


The good news is, when we entered into the second lockdown, many businesses were either still working from home, had provisions still in place from the first lockdown e.g. online strategies, and many businesses had plans in place if another lockdown was issued.


All of this means the impact of the second lockdown was far smaller than that of the first. If we compare the data we collected from the survey, we can see that 48.6% of businesses said the first lockdown extremely impact their business, while in the second lockdown only 17.1% saw a significant impact.


In fact, out of our survey audience, over half (57.1%) said their business did not see much of an impact at all from the second lockdown.

Despite these clear changes in the impact of the lockdowns on some businesses, there were still some businesses particularly those in the hospitality industries and those that supply into them were once again ground to a halt.


Have you seen a loss of customers due to the second lockdown?

Once again, taking a look at the impact of the first lockdown vs. the second lockdown we can see businesses were a lot more prepared and saw much less of an impact.

In the first lockdown, 42.9% of businesses saw a very significant impact on their customer base; in the second lockdown, over 77% of businesses DID NOT see a loss of customers at all.



The Third Lockdown


Now in 2021, how severely has the third lockdown impacted your business?


At the start of this year, we were once again put back into a national lockdown here in the UK, and it was clear from the start that this wasn’t going to be like the November lockdown and will be very similar to the first.

Despite this, the data was quite closely matched between the second and third lockdowns, with 17.1% of business seeing a significant impact in both the second and third lockdowns.

During the third lockdown, however, there was a higher percentage of business seeing a moderate impact on their business when compared with the second lockdown, but at the same time, a higher percentage also saw little to no impact in the third lockdown compared with the second.


How prepared were you for the third lockdown?


When the third lockdown hit 82.9% of these businesses were very prepared, with another 17.1% claiming they were relatively prepared. Not any of the businesses said they weren’t prepared at all, meaning that unlike with the first lockdown businesses knew what was coming and what to be prepared for.

Due to the measures that had been put in place from the previous lockdowns and the ways that businesses have had to adapt to the changing circumstances in terms of their operations and customer behaviour, the impact of the third lockdown was considerably lessened. Despite being very similar to the first lockdown, in terms of length and the restrictions imposed, the third lockdown has had nowhere near the same devastation on business development for SMEs as the first lockdown in March 2020.


Pandemic Impact Overall


Have you had to lay off staff or make redundancies in the last year due to the pandemic?


Aside from the impact of each specific lockdown, we wanted to know how the past year had taken a toll on businesses.


We asked our survey audience if they had to make staff redundancies due to the pandemic, and 25.7% said ‘Yes’ while the other 74.3% said ‘No’.

With the financial struggles caused by the pandemic over the past year, it was inevitable that some of the hardest-hit organisations would need to make staff cuts to survive, and while almost 26% of SMEs is a lot, this percentage would have been much higher had the furlough scheme and business relief payments not been put in place.


Over the past year, unemployment has hit the highest level in five years with the unemployment rate hitting 5.1% between October to December.

With the world expected to be back to normality (or something resembling normality), more businesses will be able to start focusing once again on recruitment and continue to expand their business, as they were before the pandemic hit.


Did you achieve and excel your business growth targets/goals for 2020?



For many businesses, achieving their previously set business development targets and goals last year just wasn’t realistic due to the impact of the pandemic.

With the first lockdown spanning the entirety of the second business quarter of 2020, almost every business had a lot of catch up to do if they were to achieve their targets by the end of the year.


After asking our audience whether they had managed to achieve and excel their business growth targets in 2020, 31.4% of business said ‘Yes’, 28.6% of businesses said ‘Almost’ and 40% said ‘No’.

Overall, how successful would you say 2020 was for your business?


Despite the struggles of 2020, 54.3% of our audience said last year was ‘fairly successful’ for their business, with another 20% deeming 2020 ‘very successful’ for their business.

This shows that despite the struggles that the sudden lockdown presented last March, and all of the changes that we had to adjust to, almost 75% of businesses had a successful year and overcome the serious challenges that were thrown their way.

Another 20% of businesses said that 2020 was ‘not very successful’ for their business, with only 5.7% deeming 2020 a complete failure.


Final Thoughts


​​Despite the immense challenges presented by the pandemic over the past year, many of which are still ongoing, the vast majority of UK SMEs have adapted well to the new changes and in doing so have limited the impact and even prospered in many industries.

With many industries still struggling, such as the events, hospitality, and entertainment sectors, we should hopefully see these industries getting back on their feet over the next few months as restrictions begin to ease, and in another year’s time, we should hope that all industries have bounced back as the financial and economy begins settle and return to normal.


Survey Participants


​A big thank you to everyone who took part in this survey, we really appreciate all of your input and it's great to see so many of you bouncing back after the hardships of 2020!


SandisonPay

Mortgage Magpie

Quality Essential Distribution Ltd

Dimensions

HB Tech

Quantuma Advisory Ltd

Westcon

Yellow Design & Digital

Avex International

A3M Designs

Antibody Analytics

ODC Door & Glass Systems

Mdee

beocarta Ltd

Clear Vision Financial Management Limited

Haybridge Associates Ltd

Biotechflow Limited

SmileCRM

Premier communications

PHX Training

Train AV Ltd

KNP

Tudor Group Ltd

Ten Thousand Hours

The JGA Group

Eco Brite Cleaning Services Ltd

Training Works

Elstead Lighting Ltd

Intergage

Atlas Packaging Limited

Holmegarth Business Support

Plysolene Limited


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