Direct Line Eyes Rise In ‘Balloon Business’ Model

A new report from insurance firm Direct Line for Business says small businesses have embraced a new business model dubbed the “balloon business.”

Reports in P2P Finance News on Wednesday (Aug. 29) said small businesses in the U.K. are increasingly turning to a more flexible business model that sees changes in staffing levels, and even locations, in response to a volatile market. In a survey of more than 500 small business decision makers, 74 percent said they have built their business to be able to scale up or down depending on market pressures.

According to analysts, this better equips SMBs to handle market volatility — particularly market changes resulting from Brexit. Increased adoption of pop-up stores, gig workers and on-demand talent has helped businesses become more flexible, researchers added.

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

One adverse effect of this flexibility is businesses’ revenue instability. According to its survey, Direct Line for Business found “a lack of consistent revenue throughout the year, with significant peaks and troughs.” Entrepreneurs are looking to ease the blow of this revenue volatility by launching new products or services in the coming year.

In all, an estimated three million small businesses in the U.K. are operating under the ballon business model, researchers said. Separate commentary from Greg Carter, CEO at alternative lender Growth Street, emphasized the need for businesses to have access to financing options that can be as flexible as their growth and shrinkage plans.