Yet many of those millions of SMEs are successful and if you were to ask owner managers if they are seeking to expand their businesses, the majority would probably say ‘yes’.
What challenges do those ambitious business owners face in making the transition from a small to a large business – and what knowledge and skills do they need to make the move successfully?
For many, stepping up to the next level is a curious mix of conscious planning and organic change, although in my experience, the firms that successfully shift gear do so because they understand that the process is about so much more than simply increasing sales.
Rather, it requires a more considered view on where the areas for expansion are within their sector, and how a business can meet these. For most, this will mean increasing product ranges, or even perhaps diversifying into other areas – a move which may be necessary, but one which can be incredibly risky.
Either way, ambitious plans will not evolve by themselves. The conscious decision to grow requires a significant step change in the mind-set of business owners and a commitment to review and change the company’s operating procedures and its staff.
The key is not to lose sight of what made a company good in the first place, and to balance the success formula with the ability to identify the changes that are required in order to become larger, successful business.
SMEs are the backbone of our economy and the UK is recognised as a breeding ground for entrepreneurship and innovation. These businesses can be adaptable and often far more in tune with the needs of the consumer than many larger corporations. Their internal procedures are more fluid, and as a result, they are agile and can react quickly to a shift in circumstance or a change in demand. Larger businesses can be procedure heavy with lengthy decision making processes – and therefore slower to respond to a changing marketplace.
However, the dynamic entrepreneur with a flair for coming up with new ideas may lack the commercial experience and processes of bigger companies. Indeed, the SME business owner may have deliberately avoided corporate life – perhaps believing that he or she would be a fish out of water in what they perceive to be a more rigid, less creative environment.
To turbo charge growth, the SME business owner or director needs to adopt some of the best practices from the corporate world. There are a number of key areas where changing from an SME mindset is critical; a few of which are detailed below:
· Strategy for Growth
Define a plan that focuses on the areas where there is fast growth and invest sufficient time to review the market and identify your key potential clients.
Lack of capital combined with lack of an efficient cash flow management can hold back progress and could also spell financial disaster. A business may need to invest tens of thousands of pounds in new equipment or products to support its plans. And while a substantial new contract win is a boost for any company, delays in being paid can bring it to its knees. Large corporates have financial plans and projections that underpin their businesses. I always advise that SMEs buy in expert financial advice if they don’t have the in house capacity.
A typical SME may rely on employees whose roles are interchangeable or perhaps was set up by friends or family members. A business that is seeking to expand has objectively scrutinise the team’s strengths and weaknesses and assess if the right skills are there to support and deliver its strategy. It may mean some tough decisions – I’ve known family businesses who have had to let go of cousins or brothers who are no longer the ‘right fit’ for a more creative company.
It is vital that SMEs understand that investment in technology is vital to breaking down barriers to growth. Financial planning should include investment in the necessary technology to win business, produce goods or deliver services, and to ensure outstanding customer service. I know successful small companies that survived – and even grew – during the recession by investing in new technologies that allowed them to do business quicker, smarter and more efficiently.
Research shows that the rise in small businesses reached a five-year peak in March this year. Apparently this was partly boosted by a ‘DIY ethos’ among budding entrepreneurs. As SMEs look to the next five years my advice is “don’t bodge it if you want to grow” – sometimes you may need to bring in outside expertise – professionals who have been there and got the t-shirt. Regardless of how successful you are, I firmly believe that everyone can all still learn something new every day.