Should your strategy be defensive or growth-focused?

The Small Business Index from the Federation of Small Businesses (FSB) for the second quarter of 2025, published in July 2025, had some unexpected results on the growth expectations of UK small businesses.

27% of the small businesses surveyed said they expected their business to shrink, close or be sold over the next 12 months. That outweighed the 25% who expected their business to grow over the same period. FSB says it’s the first time in the history of the index that expectations of contraction have outnumbered expectations of growth.

Should you forget about growth?

Not necessarily. But in a tougher market, it makes sense to look at how well protected your business is, and to make sure any growth plans are built on solid ground.

Here are three key actions you can take to create a more defensive business strategy.

Improve your cashflow resilience

Focus on prompt payment by agreeing shorter payment terms with your customers, and make sure you have credit control procedures in place to chase up any overdue debts. This keeps cash coming into the business, making it easier to meet rising costs.

Other practical steps include invoicing as soon as work is done, making it easy for customers to pay you, reviewing credit limits for slower payers and talking to your bank or lender early if you can see a pinch coming.

A simple rolling cashflow forecast will also show you pinch points early, while there’s still time to do something about them.

Review and streamline your entire cost base

Carry out a line-by-line review of your business costs to identify and cut any non-essential spending across the company. Look for overheads that can be reduced, such as subscriptions you no longer use or contracts that are due for renegotiation.

It’s also worth benchmarking your main suppliers. A polite conversation about prices or terms can make a difference, particularly if you’ve been a loyal customer for some time.

Prioritise investment in areas that can deliver clear, measurable efficiencies in the short term.

Focus on core customer retention and value

Put your effort and resources into strengthening relationships with your most loyal and profitable customers. Reduce your dependence on high-cost new-customer acquisition and focus on looking after your existing customer base.

Ask your best customers what they value most, and what else they might buy from you. Their answers can point to opportunities that cost far less to pursue than winning new customers.

You should also review your pricing to make sure you’re offering value, while still keeping healthy margins.

Growth still has its place

Being defensive doesn’t mean standing still. If your cash position is healthy and demand is steady, carefully chosen growth can still be the right move. The key is to grow from a position of strength: know your numbers, keep a reserve and test new ideas on a small scale before committing.

We can help you rework your strategy

Talk to our team and we’ll work with you to review and update your strategy for a challenging market, in a way that protects the long-term outlook of the business. Call us on 020 7164 0225, send us a WhatsApp message or email us at info@ibandco.co.uk.

You can also read about our strategic and business planning and management accounts services.

First published 22 July 2025. Tax content checked on 9 October 2026. This article reflects the rules at the date it was first published. Where something has changed since, we’ve added an update note. Rules and rates change, so please check with us before acting.