Leadership in SMEs: The 5 characteristics that matter most

If you're going to force yourself to do anything, communicating - good and bad - is the best thing to choose.

Much is written about leadership, but very little speaks directly to the small business owner. An assiduous CEO may devour business literature, only to discover more reasons why “that won’t work here” than practical initiatives they can apply.

The State of Small Business Britain report put it plainly: small firms face “distinct challenges when compared to larger firms, and their needs are often not fully understood or properly reflected in enterprise policy.” The same is true in organisational research. I would estimate that 60–80% of leadership studies focus on large corporates, leaving SMEs under-represented.

That gap matters. Best practice from big business can inspire SMEs, but it must always be adapted. The point is never to implant a system wholesale, but to distil what works and avoid the overengineering that stifles small firms. Productivity, connection and retention are the wins that free a leader to drive the business forward.

And in SMEs, leadership itself is often the single greatest determinant of success. Here are five characteristics that matter most — all achievable without an HR department or expensive technology.

1. Respect the different stakes

   
   

   Owners live and breathe the business; employees don’t share the same risk or reward. Great SME leaders recognise this gap in the psychological contract and work hard to create fairness, loyalty, and mutual commitment without assuming others care as much as they do. Poor leaders say, “I looked after you when times were good — you owe me.” I'm here to break it that employees who do their job and are paid in return owe you nothing more - that additional value needs to be coaxed by you.

   
   

2. Clarity in vision and communication

   
   

   With fewer layers, every word carries weight. Even bad news can be handled well, but silence is fatal. Break the flow of communication and you pay for it later. Clumsy updates beat no updates every time.

   
   

3. Personal accessibility

   
   

   Employees in SMEs expect direct contact. If a leader has never been approachable, that may simply cap engagement. But when a once-open leader withdraws, the damage is much greater. Whatever the weather, hold the line on visibility and approachability.

   
   

4. Investment in people’s growth

   
   

   Budgets may be tight, but opportunities for learning and progression are always possible. Lean times can be the best times for growth. Ask yourself: would you rather risk paying a higher salary down the line, or lose talent and pay a recruiter to replace them?

   
   

5. Authenticity and resilience

   
   

   In a small business, pretence doesn’t last. Employees take their cue from leaders who are genuine, consistent, and resilient. That doesn’t mean months of bad temper when times are hard. It means shifting, when needed, from optimistic cheerleader to practical problem-solver, without forgetting the first point: you have skin in the game, they do not.

   
   

These points are written for SME leaders who aren’t having the easiest time right now. Record numbers expect conditions to stay the same or worsen. If you are one of the fortunate few enjoying growth, you already know how rare that is. For most, the shine has been knocked off.

None of this is about faking it or pulling off miracles. It is about choosing what your team sees, setting the right tone, and keeping a measure of control even when circumstances are rough. The payoff is a team that sticks with you — and works with you — to turn things around.