According to research from American Express, the average British SME is spending around £1m a year on business expenditure. Close to 20 per cent of this amount — nearly £200,000 — is reserved for technology.
The company joined forces with the Centre for Economics and Business Research (CEBR) to carry out the study. Researchers found that this amount could vary between £225,000 for micro-enterprises, to well over £3m for SMEs with over 50 employees.
Another 20 per cent goes to payments to suppliers, while hiring staff was the biggest single expense.
Senior Vice President of American Express, Jose Carvalho, said that building a business can involve an awful lot of money. "However, businesses that have the ambition and drive to grow shouldn't be deterred,” he added. “By having a robust cash flow management system in place, SMEs will have an essential tool to manage costs efficiently without impacting the running of the business, its staff and customers."
American Express and CEBR also studied location data, which is crucial where business costs are involved. Not surprisingly, the most expensive city in the UK to do business is London, with the average cost amounting to approximately £1.8m. The cost in central England was significantly lower at £1.1m, but the south offered an even cheaper alternative at £700,000. The undisputed winner, however, was in the north of England, where it only cost £525,000 to run the average small business.
American Express advises SMEs to concentrate on cash flow instead of profits, negotiating payment terms with new clients and calculating a breakeven point where income exceeds expenses.