Balloon Businesses balloon business

Flexibility the key to viability: three quarters of SMEs scale up or down during the year to survive

  • New research identifies a new trend named 'Balloon Businesses'- with approximately three million small firms in the UK that don't follow a continuous growth trajectory but instead expand and contract throughout the year to keep up with market pressures
  • One in ten SMEs plan to increase their headcount in the coming year
  • Nearly two thirds (64 per cent) of businesses anticipate their revenue will grow in the next 12 months, by an average of 11 per cent
  • On the downside, SMEs aren't updating their insurance when their business changes
  • 11 per cent of SMEs have no insurance at all

New research1 from Direct Line for Business has identified approximately three million Small and Medium Sized Enterprises (SMEs) in the UK that need to expand or contract throughout the year to meet business demands. These companies have been named "Balloon Businesses," because they don't follow a continual growth trajectory; but instead recruit and release employees in response to business needs, or open pop-up or temporary locations as demand fluctuates.

Almost three quarters (74 per cent) of SME owners have set-up their business so they can scale it up or down without affecting its overall viability. These firms bust the myth of linear business growth and are fast becoming the backbone of the UK economy, currently employing around 12 million people2.

Nearly half (49 per cent) of SMEs say the headcount of their business fluctuates throughout the year, followed by a third of micro businesses (32 per cent) and around a quarter (27 per cent) of sole traders. When it comes to premises, a third of SMEs say the number of locations they operate from changed between the second half of 2017 and 2018, as businesses increasingly take advantage of short term leases and pop-up locations.

SMEs also highlight a lack of consistent revenue throughout the year, with significant peaks and troughs. Decision makers identify June as their most profitable month, while January is traditionally the month they record their lowest revenues.

This reflects how UK SMEs are incredibly resilient and are able to adapt to this changing environment in order to succeed. This extends beyond functional changes too; over the last five years, more than 2.6 million (47 per cent) of these companies have started offering a new product or service outside of their primary industry, with one in nine (11 per cent) expanding their service or product offering every year. In the first half of 2018, SME businesses in IT & computing were the most adept at diversification, with over two fifths (44 per cent) starting to offer products outside of their primary sector.

Jazz Gakhal, Managing Director at Direct Line for Business, said: "Traditionally business growth has been viewed as a linear process, but small companies are now incredibly agile, hiring contractors to meet demand and taking advantage of short term leases to test the landscape and expand their footprint. By adopting flexible working practices, they can quickly scale up or down their operations without putting the company's survival at risk."

British business optimism

UK SMEs are extremely optimistic about their growth prospects in the next year, with nearly two thirds (64 per cent) of businesses anticipating their revenue will grow by an average of 10.6 per cent over the next 12 months. A third of SMEs (33 per cent) plan to employ new full-time staff, while 28 per cent plan to bring in part-time staff and 21 per cent plan to hire temporary staff to deal with seasonal business demand.

Professor Robert Blackburn, Director Small Business Research Centre, Kingston University, said: "Today's' small firms operate in challenging environments but it is their agility and their ability to respond quickly to market opportunities and threats, that enables them to survive and thrive. Hence, it is important that small firms are able to adjust their costs according to their requirements, rather than be burdened with a fixed outlay. Driving down the so-called fixed costs of the business is one way of achieving this. Indeed, the ability to manage their cost base flexibly can be the difference between success and failure of a small firm as market opportunities come and go and the performance of the business fluctuates."

Emma Jones, Founder of Enterprise Nation: "The reason the UK has a thriving small business community is because the entrepreneurs running these firms are incredibly resourceful and adaptable. Whether it is making use of free Wi-Fi in a coffee shop when just starting out, or taking advantage of pop-up shops to trial a retail offering, people are increasingly taking a flexible approach to running a business. Indeed, company owners and operators are increasingly ready to let their operations shrink if necessary in the short term to ensure their long-term success. Not every company gets it right first time. To be successful it is vital for small businesses to be malleable and realise when a business needs to change."

Looking ahead, one in six SMEs (16 per cent) are planning to start offering a new product or service within their own industry in the coming 12 months. One in eight (12 per cent) want to expand their footprint within the same region, while a further 12 per cent want to expand out of their existing area of operation to somewhere new.

In spite of the operational changes they make throughout the year, nearly two-fifths (38 per cent) of SMEs only change their insurance policy annually when the existing one is about to expire. In addition to this, just 11 per cent amend their policy when there is a change to the number of premises they work from, while a fifth (19 per cent) do so when there is a change to headcount, meaning they risk invalidating their insurance or being underinsured. Even more concerning is that one in nine SMEs (11 per cent) claim that they do not have any insurance at all, rising to 36 per cent of sole traders who admit they don't have any cover whatsoever.

Jazz Gakhal continued: "Small businesses are constantly changing so they need insurance cover that can flex as their business does. While being agile is important for businesses in the UK, there is a risk if the policy is not up-to-date. Direct Line for Business has recently launched an end-to-end business insurance solution that enables customers to personalise their policy according to their business needs.

"We also have no mid-term amendment fee, which means our customers can make cover revisions whenever their business goes through change, so they can feel reassured that they have the right cover in place and a policy that keeps up with their ever changing world."

Direct Line for Business' recent transformation programme enables SMEs to buy insurance direct with confidence. The solution follows an intuitive sales journey asking business owners some basic questions and then guide's them to a customised policy that is totally unique to their business. This means policyholders will only pay for the insurance that they need.

For more information about Direct Line's Small Business Insurance visit the website:

Notes to editors

1 Consumer omnibus research completed amongst 505 UK SME decision makers between 28th June and 3rd July 2018

2 Department for Business, Energy and Industrial Strategy Business population estimates for the UK and Regions 2017, published 30th November 2017

For further information please contact:

Citigate Dewe Rogerson
Samantha Stewart
Tel: 020 7282 2856

Direct Line for Business
Jade Trimbee
PR Manager
Tel: 01372 839 452
Mobile: 07825 315 931

Direct Line for Business

Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone and online.

Direct Line for Business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No ‍1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Direct Line for Business and U K Insurance limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line for Business products or get a quote by calling 0345 878 5603 or visiting

Press Release Small Business Insurance

Added: 12 Dec 2018