Sovereign SmartViews: Why is dissatisfaction an opportunity to evolve & innovate in business?

By Paul Mangan, Investment Manager

Given SMEs account for 99% of all UK private businesses and generate c.51% of all private sector revenues, why are they so often underserved by large service providers?

A recent survey of 500 UK SMEs by Adaptive Lab discovered that 60% of respondents felt undervalued by major service providers such as banks, telecommunications and large utilities providers. Similarly, 59% felt that traditional service providers failed to tailor their services to accommodate the size of business customer they were providing for.

All too often large service providers, which predominantly focus on the bigger corporate customers, are unable to effectively accommodate the needs of SME customers who rely on a high quality of service at a cost effective price.

Aligned to this, SMES are typically short of time and resource to shop around and use multiple service providers, often settling for a simpler solution which may not be “best of breed” or cost efficient. Hence dissatisfaction represents a huge opportunity... If you are a service business that can innovate to deliver a tailored, affordable and adaptable service offering for the changing needs of the growing and ambitious SME customer base – the opportunities have never been better.

Sovereign, for example, recently backed the MBO of Utility Bidder, a successful energy broker, offering energy procurement services to UK, SME customers. The company currently brokers energy and other utilities contracts to over 14,500 SME clients across a number of industry sectors. Their success has been underpinned by their focus on customer service - understanding the unique energy needs of small and medium sized enterprises. By doing this they are able to secure the best energy deals and hence enjoy high customer retention. The Utility Bidder management team are now looking to evolve their offer in what is a fragmented market.

The opportunities are equally there for other efficient and agile providers of services to SMEs - whether that be commercial energy, insurance, lead-generation, telecoms or business financing. When you can really understand the needs of your SME customers, deliver a tailored service at affordable prices, and keep pace with their evolving needs… you really can create a market leading business.

Sovereign is looking to invest in ambitious and growing businesses within this space to create market leaders. For further information, please get in touch.