High profile business failures are grist to the mill of those predicting a deep recession, and B2B marketers could be forgiven for thinking that it’s simply too risky to go looking for new customers. But while credit is tight and fewer businesses are starting up, data from the B2B universe puts forward a different story of the impact of the recession on the UK’s SME population.
Risky perceptions
Many B2B marketers have already shifted their focus from customer acquisition to customer management in recent months, believing it’s easier and, of course, less risky to stick to the customers they know will pay their bills and are more likely to remain solvent and in business. Sticking to what you know is a sensible approach, but at the same time you are in danger of missing out on opportunities from many of the sound businesses in the economy that could have a need for your products and services.
According to Experian’s March 09 ‘Insight Report’, there’s a danger that perception is starting to drive reality and so fuelling the downturn in the economy and there’s certainly the data to support this argument in the B2B world.
How much have businesses in the UK been affected by the current liquidity crisis? And when exactly did the downturn start to impact small businesses? There have been numerous media reports and debates around these questions in recent months, however, much of the evidence relating to SMEs in particular has been heavily anecdotal.
SMEs weathering the storm
Analysing the financial and insolvency data of every business registered at Companies House (excluding those firms that are registered, but do not trade and young firms less than 24 months old) it seems that reports of a possible recession as early as September 2008 were exaggerated.
So far, there hasn’t been the spike in SME failure rates seen in the 1991 recession.
The raw data shows an increase in the number of business failures. However, if you look at the business failure rate that’s the number of businesses failing as a percentage of the overall business population, which has likewise been increasing in recent years then a different picture emerges.
In fact, after a measured (but far from catastrophic) rise since the end of 2007, the default rate was actually down in January 2009 from its level in December 2008, and still lies at only a third of its 1991 level. Not only are we still far from the 1991 peak in terms of default rate, we are in fact just barely back up to early 2003 levels.
That’s one measure, but this general trend is confirmed by looking at other measures such as the financial solidity of SMEs and the speed at which businesses are paying their bills. Assessing the B2B universe using balance-sheet and P&L factors, such as liquidity and gearing, reveals that there has only been on average a very gentle decline in the financial strength of the business population since late 2006. But this decline is well within normal historical variations, right up to January 2009.
Similarly, looking at payment performance data of businesses shows that the ‘days beyond terms’ (the length of time a business takes to pay its bill after the agreed terms) has been rising, but only gradually, since the end of 2007, and it’s larger businesses that are hoarding cash.
Using data to appeal to customers
So what’s all this got to do with B2B marketing? Well, what this evidence points to is that the recession is still not written in stone.
The SME population, the backbone of the economy, is not yet in a terminal state and if the gloom psychology could be reversed quickly and support provided in terms of injecting liquidity, we still have a chance to avert a deep and long recession.
It also shows there are still many sound and effective businesses operating within the economy, despite the downturn. If they’re not your customers already, it’s a matter of finding them while they are still in good supply, even though there are fewer of them. If they are your customers, it is about making sure you continue to appeal to them.
That’s where data analytics comes in. Drawing in data from the business universe to identify these sound prospects, learn what makes them tick and so be able to communicate effectively with them. In a tough climate, there’s no need to stop marketing, but a more robust approach one that puts real data insight at its very heart is certainly needed.
