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Small firms are more profitable, survey finds

Firms with up to 50 staff up their game to survive the downturn, says ACE

Small construction firms have become more efficient than their larger peers in order to survive the economic crisis, a new survey has found.

The survey by the Association for Consultancy and Engineering (ACE) found firms with up to 50 staff had smaller falls in revenue, bigger profit margins and spent less on their fee earners who each bought in more money than in large and medium sized companies.

The Benchmarking Lite survey of 36 small firms found they took seven days less than big companies to collect their debts and were much more successful in winning work through competitive tenders.

Turnover of small firms fell by 1.6 per cent compared with 3.3 per cent for larger firms in 2011 against 2010.

Profit margins amongst small firms dropped from 10.8 per cent to 9.7 per cent whereas in larger firms it declined from 6.8% to 4.4%.

Small companies earned £1.61 of revenue for every pound they spent on employees, which was significantly better than the £1.47 achieved bytheir larger competitors.

Small companies also won 65 per cent of their competitive tenders against 48 per cent for bigger players.

A spokesman for the ACE said small firms had become more effiicent in response to the downturn. He said: “Over the period of the benchmarking exercise small companies have performed fairly well and dynamically but they did suffer in 2009 and 2010 following the recession. The latest survey suggests they are beginning to control their costs and improve their performance.”

ACE contrasted the findings for larger firms from its main benchmarking survey with those from smaller firms in Benchmarking Lite.

Benchmarking Lite is a new survey focussing on small firms. The ACE’s main benchmarking survey, which has run annually since 2006, also includes small businesses but asks for more detailed information not always suited to the accounts of smaller firms.

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