Across the UK 99.5% of the 1.3 million private sector businesses with more than one employee are SMEs (businesses with < 250 employees).
These SME businesses are the engines of the economy. They employ 11.2m people and generate sales of £1.5 trillion. As a society we need SMEs to grow, change and improve with ambitions beyond the immediate needs of “filling the fridge and sleeping at night”.
But businesses face considerable challenges as they “scale up”. The UK Small business population (10 – 49 employees) is 204k. And only a resilient few will eventually grow to become Medium businesses (50 – 249 employees); UK population 33k.
So how does a business grow? Here are some factors for owner managers to consider as they embark upon growth:
- Thoroughly understand your product offering and competitive position. Monitor trends and be ready to adapt to them
- Know intimately what your customers value and are willing to pay for. Look for opportunities to broaden your product/services offering
- Think about your business’s core capabilities and how these might be applied in new sectors
- As you grow incremental sales opportunities are harder to find. Harness the power of a CRM system to capture enquiries, build customer confidence and track the sales order cycle
- The sales function has to evolve to think in terms of solving customer problems rather than just taking orders
- Success will come through building long term relationships, repeat business and “going the extra mile” to ensure the highest levels of customer service and satisfaction
- Growth will change the cash flow dynamics of the business. Financial control, particularly the management of cash, funding sources, working capital and headroom, is vital
- Strengthen this function by hiring a professional and establish some core financial disciplines early on
- Make sure you as owner manager understand all the drivers of cash
- Recognise that not everyone you started the business with will be able to, or want to grow with it
- Make changes ahead of need. Whenever possible promote from within but if hiring externally bear in mind the need for new starters to “fit in”
- Keep everyone’s focus on sales and customer experience by introducing a monthly bonus scheme linked to the sales budget and some measure of customer satisfaction (quality, delivery, complaint metrics). Paying monthly makes the feedback, good or bad, instant and immediately highlights stuff that went wrong or needs improving
- Learn to delegate. You can no longer take all the decisions or do everything. Instead you must become the mentor, empowering teams
- Focus on the vision, setting the business culture, planning the future and being the story teller always communicating the longer term business goals and objectives
- Be ready to “deep dive” into problems and use these as learning opportunities for individual, team and company development
- Make sure you have meaningful monthly management information (financial, sales, operations metrics, product development) and formally review it
- Consider a business mentor or appointing a Non-Executive Chairman/Director to bring an outsider’s fresh perspective to Management’s review of progress and investment decision making
- Develop a financial three year business plan. It helps to have a map; it gives confidence to funding sources and, if in a supply chain, will help customers better understand the business’s trajectory
- As you grow you will have to rethink how you deliver value and question every aspect of your value stream; everything today has to be a “total satisfaction” customer experience
- Keep in house only what is unique or vital to your product offering and responsiveness. Simplify what you do or the increasing complexity will kill you
- Make sure you have a good in-house IT person to keep the computers and systems running. As the business grows it will become more complex and better systems will be needed. Keep up with the underlying technology but leave the detail to your IT expert
There is no doubt that size matters. As a business grows it gains purchasing power, gets better access to funding sources, attracts more talent and gets more noticed. To ensure sustainability growing firms often have to look beyond their local horizons. Exporting, gaining new products through technical agreements and Joint Ventures should all be considered as a means to deliver extra scale.
Most business growth can be planned but almost always there is an element of luck and timing. In the end this is all about ambition, management and resilience. There is no long term without the short term. So manage for today, keep agile and lead for tomorrow.
Data source: DBIS Business Population Estimates 2015 – UK Business population 5.4m of which 4.1m have “no employees” (sole proprietorships & partnerships or only one employee director)