Determinants of Profitability in Small and Medium Sized Enterprises in the UK

Research Title:
Determinants of Profitability in Small and
Medium Sized Enterprises (SMEs) in the UK
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Acknowledgement
I owe my deepest gratitude to almighty “Allah” the most Gracious and the most Merciful, who
has provided me ability to complete this work. This dissertation would not have been possible
without my mentor who has motivated me to have proper contribution the project. Along with
this, the proper standards are being followed in order to advance the commitment so that entire
dissertation can be carried in the right manner. Learning about such measures has also inspired to
have proper contribution. I am thankful to family members and friends because they have
provided me support in completion of the research work. Along with this, I would like to thank
my classmates who have provided me support in the understanding of subjects so that
dissertation writing can be accomplished. I would also like to thank my classmates who has
assisted me to have appropriate analysis. Support of Professor. MERVIN SOOKUN, my
professor has provided me diverse suggestions to strengthen the outcome of the investigation,
which has provided me assistance in completion of dissertation. At last but not least my thanks to
all my lecturers who helped me in meeting academic criteria during the journey of the University
of the West of Scotland.
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Abstract
Enterprises are being owned and managed by the small corporations, sole proprietorship and in
partnership. In this, less employees are being employed are being appointed for working in the
company. Enterprises mainly lacks with their financial support as these companies are owned by
less number of people so the amount contributed is also limited. This results with the deficiency
of the funds for the development of the company. HR strategies allow ensuring that social and
human resource aspects are well maintained. (Collis and Hussey, 2009). There are a number of
factors which provides a better success of the small business organisations such as business
culture within organisations is well motivated it also has a direct impact on the profit margin
ratio of business. Evaluation that the majority of small businesses' precept that operations is
profitable. It has been noticed that respondents' percept that their cost and current sales are at the
same level so they cannot provide appropriate in respect to the statement (Clark, 2002).
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CHAPTER 1-
1.Introduction
1.1 Overview
Small business organization is considered as one of the critical aspects of the UK economy
because it provides a high contribution to economic development. Such kind of businesses is
mainly operated at a small scale and numbers of employees are also less. In addition to this, it
can be said that enterprises that employ less than 250 employees, whose annual turnover is up to
the maximum limit of 50 million Euro and total of the balance sheet does not exceed 43 million
Euro are called as small and medium-sized enterprises (SMEs) (UK small business. 2013). With
the change in time, a role of SME's in the economic growth and development has also
transformed (Miles, 2011). They make an effective contribution to the nation’s growth in context
to the advancement in gross domestic product (GDP), more employment opportunities and
bringing innovation. With reference to United Kingdom (UK small business. 2013), in the
beginning of 2016, 5.5 million private sector enterprises are operating as SMEs which have been
increased by 97000 from 2015.
Along with this, SMEs that are able to get sufficient capital are suffering with difficulties due to
lack of management skills and experience. Entrepreneurs have no great knowledge of financial
management and unable to utilize the funds and revenues in an efficient manner which in turn
increases business costs and results in declining profitability (Nijssen and Frambach, 2001).
However, in the present scenario of volatile external market conditions, only those entities can
survive that are operating successfully.
It has been noticed that small business firms are mainly focused towards advancement in the
profit margin ratio. A number of activities with regard to financial analysis are being considered
as a critical aspect so that management with respect to costing can be controlled effectively.
Businesses are also well focused towards business expansion in order to have advancement in the
market share (Afiouni, 2013). By having the assistance of expansion activities, business entity is
well focused towards profit margin ratio. It has been noticed that profit can be advanced through
improvement in sales (Allen and et.al., 2014). In the present study, key aspects will focus on
profitability of SME’s who have operations within UK. Moreover, this research also provides
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determination of various factors that affect the firm’s profitability. Furthermore, it also compares
the profitability of a small sized business with a medium sized organization of the UK. It also
provides information with regard to various growth indicators of the profitability of SMEs. In
association with this, recommendations about appropriate ways to maximize net return of SMEs
in the future period is also a critical aspect of the study (Reid, 2007).
1.2 Research Problem
Small business firms are having an effective participation in the economic development of the
UK. Along with this, a number of small business organizations of UK are looking forward to
have expansion in the services so that the profit margin and market share can be advanced
efficaciously (Agrwal, 2012). It has been noticed that a quantity of previous readings have been
conducted to evaluate the profitability of SMEs but there are very few evidences present with
regard to profitability. In order to overcome the limitation of previous studies, the existing
dissertation topic “profitability of small and medium sized enterprises in the UK. ” Is being taken
into account (Sahut and Peris-Ortiz, 2014). Moreover, in the historical years, none of the
investigators compared operational performance of a small sized entity with that of a medium
sized firm. In addition to this, it can be said that the current study is beneficial to overcome the
gap between key aspects and provide a better understanding with respect to the small business
firms and their working.
A number of initiatives are taken into account to promote the working and the presence of small
business firm. It means that by having appropriate information about the subject, overall working
of small business firms can also be advanced successfully. With the help of this, they can
formulate better policies and make decisions for encouraging SMEs. In accession to this, firms
will be getting benefited because they can find numerous ways to maximise their potential to
make profits (Andersen and et.al. 2016). As a consequence, they can move their operations
without any hazards would enhance strategic and competitive strength and assure long-run
sustainability as good. Another rationale behind the selection of topics is that small businesses
are having consideration of policies to improve the market share and sales. But they do not have
an actual understanding about cost control which is significant for the advancement in profit
margin ratio. By receiving an appropriate consideration of the key elements of the study
outcomes, such kind of issues might overcome (Hatten, 2011).
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